Correcting Common Misperceptions About the State of Antitrust Law and Enforcement in Digital Markets

45 Pages Posted: 2 Jul 2020

See all articles by Geoffrey A. Manne

Geoffrey A. Manne

International Center for Law & Economics (ICLE)

Date Written: April 17, 2020

Abstract

Allegations of the insufficiency of the modern antitrust regime regularly take as given that there is something wrong with antitrust doctrine or its enforcement, and cast about for policy “corrections.” The common flaw with all of these arguments, however, is that they are not grounded in robust empirical or theoretical support. Rather, they are little more than hunches that something must be wrong, conscripted to serve a presumptively interventionist agenda. Because they are merely hypotheses about things that could go wrong, they do not determine — and rarely even ask — if heightened antitrust scrutiny and increased antitrust enforcement are actually called for in the first place.

Of course, it is possible that there are harms being missed and for which enforcers should be better equipped. Advocates of reform have yet to adequately explain much of what we need to know to make such a determination, however, and even more so to craft the right approach to it if we did. Laws should be formulated on more than an intuition that surely, somewhere, there must be anticompetitive conduct. Antitrust law should be refined on the basis of an empirical demonstration of harms, as well as a careful weighing of those harms against the losses to social welfare that would arise if procompetitive conduct were deterred alongside anticompetitive.

Contrary to the conventional wisdom, enforcers are hardly asleep at the switch and courts are hardly blindly deferential to conduct undertaken by large firms in the digital economy. It is impossible to infer from the general “state of the world,” or from perceived “wrong” judicial decisions, that the current antitrust regime has failed.

In particular, several common misperceptions seem to be fueling the current drive for new and invigorated antitrust laws. These misperceptions are that:

We can infer that antitrust enforcement is lax by looking at the number of cases enforcers bring; Concentration is rising across the economy, and, as a result of this trend, competition is declining; Digital markets must be uncompetitive because of the size of many large digital platforms; Vertical integration by dominant digital platforms is presumptively harmful; Digital platforms anticompetitively self-preference to the detriment of competition and consumers; Dominant tech platforms engage in so-called “killer acquisitions” to stave off potential competitors before they grow too large; and Access to user data confers a competitive advantage on incumbents and creates an important barrier to entry.

I address these misconceptions in turn.

Keywords: antitrust, competition, concentration, digital markets, technology platforms, vertical integration, market definition, killer acquisitions, anticompetitive self-preferencing

JEL Classification: K2, K21, K23, L4, L5

Suggested Citation

Manne, Geoffrey, Correcting Common Misperceptions About the State of Antitrust Law and Enforcement in Digital Markets (April 17, 2020). Available at SSRN: https://ssrn.com/abstract=3623690

Geoffrey Manne (Contact Author)

International Center for Law & Economics (ICLE) ( email )

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