62 Pages Posted: 7 Oct 2020 Last revised: 17 Oct 2020
Date Written: September 30, 2020
Digital platforms are the railroads of the modern era. In the early twentieth century, a vast railroad network stretched from coast to coast, forming the backbone of commerce in the United States. Bridges and tunnels were essential to reach certain destinations and, sometimes, entire regions. Control over these bottlenecks in railroad networks enabled gatekeeping monopolists to exclude competitors from crucial markets. In response, the Supreme Court imposed a novel remedy by granting competitors access to this critical infrastructure under the Sherman Act—an approach known as the ‘essential facilities’ doctrine.
Today, digital platforms serve as essential facilities for the digital economy—a sector that is omnipresent in modern life. Google, Amazon, Facebook, Apple, and others control the bottlenecks of the internet and provide services to end-consumers through that infrastructure—in direct competition with independent businesses. Platforms leverage their exclusive control over search engines, e-commerce platforms, and app-stores to exclude rivals from markets for digital content, goods, and services thereby harming consumers and stifling innovation. The clear remedy is to grant competitors fair and equal access to these essential digital platforms. Yet the essential facilities doctrine has fallen prey to excessive judicial trust in self-correcting markets and the ensuing curtailment of antitrust enforcement.
It is high time to revive, renew, and expand the essential facilities doctrine in the digital economy. As with railroads, the doctrine can once again open markets while preserving network-based efficiencies. Economic insights into the optimal design of intellectual property rights provide valuable lessons for structuring an essential facilities doctrine for the digital age: creating and protecting monopolies, via exclusive rights or otherwise, can incentivize innovation. However, any monopoly must be limited in scope and duration to ensure competition. Building on these notions from IP, I suggest a two-tiered remedy: At its first level, regulators and courts must bar platforms from discriminating and self-preferencing. At its second level, after an appropriate amortization period, antitrust enforcers must upend platform-monopolies entirely, by forcing interoperability between platforms. Overall, this renewed version of a judicial doctrine from the early twentieth century will strengthen competition and spur innovation in the digital markets that have come to define modern commerce.
Keywords: Antitrust, Platforms, Competition Policy, Tech, Essential Facilities Doctrine, Intellectual Property, Innovation
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