Shot Across the Pond: UK Competition Authority Makes the Case for How to Regulate Google and Facebook
Shot Across the Pond: UK Competition Authority Makes the Case for How to Regulate Google and Facebook
Shot Across the Pond: UK Competition Authority Makes the Case for How to Regulate Google and Facebook

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    The United Kingdom’s Competition and Markets Authority (“CMA”) released its interim report on digital advertising markets in December. The report deserves careful attention by U.S. policymakers and the public. Of course, the findings are “interim,” so they may change as the CMA receives feedback and compiles its final report. (In case you are not inclined to read the 283-page report plus very interesting appendices yourself, I’ve summarized some of the most interesting points in a document here.)

    Despite being interim proposals, I believe the proposals in this report deserve immediate attention by U.S. policymakers and antitrust enforcers. If these findings turn out to accurately describe the forces driving current market conditions in the U.S., we will need both aggressive antitrust intervention and an entirely new regulatory structure to open the digital market to broad-based competition. 

    Facebook and Google have market power. It may seem obvious that Facebook and Google are powerful, but it’s really significant that the UK has done the economic analysis to actually show that they have market power in the ways the law requires. The legal analysis for determining market power is similar in the UK and the U.S., and the market share data and industry structures are reasonably likely to be similar as well.

    Even where companies have not committed antitrust violations, the CMA wants to regulate companies with strategic market position. In the U.S., the University of Chicago’s Stigler Center Report on Digital Platforms referred to it as “bottleneck power.” The U.K.’s Furman Report on Digital Competition called it “gatekeeper power.” Now, the CMA is calling it “strategic market status,” or SMS. All these ideas are getting at the same thing. The UK goes more in depth on defining it, which is really helpful for our discussions in the U.S. as well. The key is that these companies have a lot of power and are very difficult to compete against, even if they have not violated the antitrust laws. Companies in this situation should still be required to follow rules that promote fair competition on the platform and promote competition against the platform. A new regulator is needed to address legitimate policy concerns, like discriminatory practices that are difficult or impossible to address under antitrust law. 

    The government interventions the UK is considering have two goals, fairness and competition. The theory is that competition interventions will help in the long term, by creating competitive pressure to keep dominant firms in line, as well as making it possible for a new competitor to actually provide a real alternative to Google or Facebook in some industries they currently dominate. In the meantime, they propose fairness interventions to improve the nature of competition on the platforms, while they still retain the market power they currently have. I think of nondiscrimination as a regulatory tool that addresses both of these concerns. Protections against “dark patterns”-style manipulation seem to fit more in the fairness category. And interoperability remedies are more in the competition category. However, both dark patterns prohibitions and interoperability requirements also may benefit competition and fairness respectively.

    The report provides a roadmap for policymakers in the U.S. The UK’s report may support the antitrust investigations at the federal and state level that are already underway. Antitrust enforcers can use this report to supplement their learning and guide their research and document requests so they can conduct comprehensive and aggressive investigations. The report also includes important research on the types of regulations that would be useful and why they are needed. This means it will also be helpful in building the record for why a new regulator with a specific set of tools is needed to promote competition here. The House Judiciary Committee and its Antitrust Subcommittee are conducting an investigation with similar goals, which Subcommittee Chairman David Cicilline says will be released as a report in April. This, together with the antitrust investigations into dominant platforms by our federal antitrust enforcement agencies and state attorneys general, constitute the U.S. side of this discussion from policymakers. However, just as in the UK, it is high time for U.S. policymakers to begin developing a framework that would augment antitrust enforcement to make sure that digital markets do not tip toward monopoly.