Gatekeeper Competition Policy

Abstract

The “Gatekeeper” approach to competition policy proceeds by identifying a few large firms as gatekeepers. It then applies aggressive competition rules to them while leaving others unaffected. Legislation that was considered last year in Congress would have done this. While that legislation failed to pass, the issue of competitive control of large firms remains alive and will certainly return.

The proposed American Innovation and Choice Online Act (AICOA) illustrates the problems of gatekeeper approaches. First, it selects for harsh treatment a portion of the economy that is generally outperforming the rest. Economic growth in online markets is much higher than in old economy markets. Second, it limits its domain to online firms without any basis for thinking that competition problems are more serious in that portion of the market. While more work needs to be done in this area, presumptively online markets are at least as competitive as traditional markets. Third, by defining covered firms by large firm size rather than product market share it misses anticompetitive actions by firms that are smaller overall but dominant in particular products. Finally, for those firms identified as gatekeepers it would prohibit a great deal of competitively harmless activity. For example, antitrust law already imposes limitations on "self-preferencing," but requires a showing of harm to competition. The broad self-preferencing prohibitions in the AICOA would encourage unneeded free riding and impose enormous administrative costs. Prices would very likely go up and choice would go down.

Keywords: AICOA, Monopoly, Dominant Firms, Online Competition, Self-Preferencing