Taking Behavioral Antitrust Seriously: On Default Agreements as Exclusive Dealing and the Debiasing Potential of Default Randomization

Abstract

Antitrust law, deeply influenced by economics, has only recently begun integrating behavioral economic insights. This shift is exemplified by some of the most important recent antitrust interventions worldwide, like the Digital Markets Act in Europe that mandates users to choose their default internet browser, search engine, and digital assistant, and the recently concluded Google antitrust trial in the U.S., in which the DOJ sued Google for payments to Apple and other distributors to maintain its default search engine status. These interventions rely on the theory that setting an application as users' default can be equivalent to an exclusivity contract because people tend to stick to the status quo. This theory suggests that firms exploit users' inertia to preserve their dominance in digital markets and recommends forcing users to choose their default settings to promote competition. This article critiques the theory's foundation in behavioral economics, illustrating how it has misguided enforcement efforts towards behaviors unlikely to harm competition by themselves and led policymakers to adopt counterproductive remedies. This work proposes a dual-process model of decision-making to explain the causes of status quo (or default) effects in digital applications, assess the antitrust implications of default effects on application distribution, and evaluate the effectiveness of potential debiasing policies. According to this model, default settings tend to stick when users are either satisfied with the default, unaware of alternatives, or misperceive substitutes' quality. Undesirable defaults are unlikely to endure, particularly when users are aware of competing options. This article tests these hypotheses through two experiments and a synthetic control model. It reveals that while default effects exist, their impact and persistence are generally much less substantial and more variable than what enforcers and policymakers have assumed. Moreover, in markets where users have strong preferences, forcing them to choose defaults typically results in the dominance of the most popular option. These findings have significant implications for antitrust policy, especially regarding exclusive dealing standards and debiasing remedies. With respect to standards, when considering that defaults only distort the choices of a subset of users, cases brought under Section 1 of the Sherman Act and Section 3 of the Clayton Act are more likely to be screened out. However, this work shows that monopolists often use default settings as part of a broader monopoly maintenance strategy for which a more general theory of harm (Section 2 of the Sherman Act) is more appropriate. Regarding debiasing remedies, this study indicates that forcing people to choose their defaults may not significantly alter entrenched market dynamics if most users engage minimally with the choices presented to them and market forces already provide sensible defaults. Default randomization may be a more impactful intervention, but the least sophisticated users would bear most of the policy costs (i.e., sticking to a less preferred default). The paper concludes with three policy recommendations: First, regulators should base behaviorally-informed

Keywords: default applications, monopolization, experimental law and economics, exclusive dealing, digital markets

JEL Classification: K21, L12, D03