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Competition Law: A Review



Authors: Pearl Luc


Mentor: Filipa Paes. Filipa is currently a doctoral student in the Faculty of Law at the University of Oxford.

 

Abstract

The rising influence of technology has transformed the economy and therefore markets, redefining the way businesses can operate and creating new opportunities for growth and creating value. At the same time, new opportunities for harmful business conduct come into play, posing as a new challenge for competition law agencies. This review article reviews the ways in which technology has transformed the function of market structures, the opportunities in mergers and acquisitions, and the possibilities for anticompetitive conduct. It goes over the ways technology has redefined economic concepts, and reveals what these changes mean for competition law regulation. It contextualises regulatory gaps that have emerged, as competition agencies have failed to fully understand Big Tech’s inner workings, and guidelines have failed to properly control them. Finally, this article addresses the potential adjustments to competition policy scholars have discussed in better accommodating the age of digitalization.


Introduction

 

This review article will discuss how new technologies have impacted competition policy, in particular, the regulation of monopolies, anticompetitive conduct, mergers, and acquisitions.


Nowadays, algorithms play a key role in the success of digital firms, and have the potential to positively impact consumer welfare. Inversely, algorithms can facilitate tacit collusion, manipulate consumer choice, and cause individual price discrimination.[1] The use of algorithms to set prices is of immediate relevance to competition law and it is a practice that has become mainstream with 53% of responding retailers admitting to using algorithms to track competitor prices, of which 78% deploy them to adjust their own prices based on price tracking results.[2]


The introduction of “deep learning” algorithms has added further complexity to the issue of competition law enforcement. The intricate artificial neural network of these algorithms can prove difficult to predict over time, and its ability to identify patterns without providing insight into how those actions were made poses further complications to ideals of transparency and fairness in competition.[3] This concern has been referred to as the “black box” character of algorithms. This has proved to be a concern to competition law authorities, since it is critical to understand the inner workings of such algorithms in order to design legal restraints for them, especially with the increasing implementation of such programs.[4]


The review will begin by providing an overview of the current state of competition law. In particular, we will start by introducing the main regulatory bodies and provisions that govern this area of law, as well as the ideals and principles upon which competition policy is founded. The review will then focus individually on the challenges technology has presented to a number of competition law concepts: monopolies, mergers and acquisitions, anticompetitive conduct, and collusion. As scholars have noted, the competition policy landscape has been heavily modified by the introduction of new technologies, platforms and algorithms. Indeed, it has been argued that new technological developments present a wide range of challenges to the current laws of competition,[5] as it has redefined the notions of markets,[6] monopoly power,[7] tacit collusion,[8] and even industries.[9] Finally, the review will survey the proposals scholars and policy makers have set forth to address these novel challenges to competition in markets. Unfortunately, the review is unable to cover all legal provisions regulating competition around the globe. Instead, the review will use policies by the US, UK, EU and India as examples, as that is where the literature concentrates.


Competition Law: How did we get here?

 

Antitrust or competition law refers to a set of legal regulations and principles that aim to promote fair competition in the marketplace and prevent the abuse of market power by dominant companies. Its primary objective is to protect consumer welfare, encourage innovation, and maintain a level playing field for businesses. Competition law typically prohibits anti-competitive practices such as price-fixing, bid-rigging, market allocation, abuse of dominance, and mergers or acquisitions that may substantially lessen competition.


As Ezrachi has argued, though competition law and policy vary across jurisdictions, its fundamental principles remain consistent.[10] Different jurisdictions will have varying policies, but foundational principles in common: there will be prohibitions on anti-competitive agreements and the abuse of a dominant position, governments will implement mechanisms to control mergers, and international cooperation will be promoted. Indeed, most countries have established competition authorities and regulatory bodies to enforce and ensure compliance with these laws.


For example, in the US the Federal Trade Commission (FTC) serves as an independent agency that works to protect consumers and promote competition, enforcing both antitrust laws and consumer protection laws. The FTC, working with the Department of Justice (DOJ), investigates and takes enforcement actions against anti-competitive behaviour, such as mergers and acquisitions that may harm competition, unfair methods of competition, and deceptive or unfair trade practices.[11] Moreover, in the United Kingdom, the regulatory body responsible for enforcing antitrust law is the Competition and Market Authority (CMA). Its primary functions include merger control by reviewing mergers and acquisitions that meet certain thresholds and assessing their potential impact on competition, in addition to investigating and taking enforcement actions against anti-competitive behaviour (including cartels, abuse of dominance, and anti-competitive agreements). Ultimately, it is this body that is responsible for imposing fines on companies found in breach of competition law. Essentially, these authorities investigate anti-competitive behaviour, impose fines or penalties, and attempt to regulate mergers or acquisitions.


Competition law provisions vary across jurisdictions at philosophical, political, legislative, and enforcement levels.[12] Competition law may be developed in light of a nation’s separate policy concerns, like public health, social protection, consumer protection, environmental concerns, investment, transportation, or regional development. The European Union competition regime reflects the region’s history with the German ordo-liberal school, promoting humanist values of individual freedom from private or governmental powers.[13] The European market integration has also been a principal driver in EU competition law,[14] affecting the nature and degree of competition enforcement. United States competition law reflects the country’s history with powerful trusts and monopolies following Civil War industrialization, as antitrust provisions worked to target the victims of market power and reduce the power of large trusts.[15] The country’s history with powerful trusts provides reason for US competition law being commonly referred to as “antitrust law.” The application of US antitrust enforcement has evolved to reflect values in advancing consumer welfare, largely encouraged by the Chicago School.[16] Modern applications of US antitrust law have also been working to reduce its vulnerabilities to non-economic considerations, as the FTC and DOJ work to foster transparency and predictability.[17] Different jurisdictions’ competition law reflect various national interests. Section 54 of India’s Competition Act of 2002 contains an exempting mechanism in light of public interest, or security of the state.[18] The consideration of public interest also affects the UK’s competition law, as it allows the Secretary of State for Business and Enterprise to approve mergers despite competitive concerns,[19] as was the case for the merger between Lloyds TSB Group plc and HBOS plc.[20] While connected through a central foundation of economics, competition law and analysis remains dynamic, able to adjust to the wide range of social and market realities of different jurisdictions.[21]


The main legal provisions of current governing competition law have been widely regarded and analysed, especially with the coming digital age. This review focus on a limited set of jurisdictions: the US, EU, UK and India, which are regulate competition in markets through the following legal provisions:


● The principal antitrust laws in the US are the Sherman Antitrust Act of 1890, the Federal Trade Commission Act of 1914, and the Clayton Antitrust Act of 1914. The Sherman Act of 1890 was largely a response to large concentrated power held by trusts in the country at the time, and it was intended to preserve competition against the trusts’ various monopolistic activities.[22] The Sherman Act is known for not prohibiting every possible restraint of trade or competition, as it only targets those deemed “unreasonable” and “exclusionary.”[23] The Federal Trade Commission Act of 1914 also bans unfair or deceptive business methods that harm competition, but additionally created the Federal Trade Commission (FTC) as an expert administrative agency to specifically and solely bring cases under the FTC Act.[24] The FTC Act does not technically enforce the Sherman Act, as its purview was more so intended to cover similar activities that do not neatly fit the neat confines of the Sherman Act’s categorization.[25] The Clayton Act of 1914, enforced by both the FTC and DOJ, has a similar role to the FTC Act, as it more specifically addresses practices like interlocking directorates, that the Sherman Act does not definitively prohibit.[26] The Clayton Act also allowed private parties to sue for triple damages when harmed by conduct violating the Sherman Act or Clayton Act, as well as obtain court orders to prohibit such future anticompetitive conduct.[27] In 1976, the Clayton Act was amended by the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act), which established an early notification system for large mergers and acquisitions (M&As).[28] This allowed for the government to hear about and assess potentially anticompetitve M&As in advance.


● The principal competition provisions for the EU are in the numerous articles of the Treaty on the Functioning of the European Union (TFEU), which are enforced by the European Commission. Article 102 of the TFEU is roughly comparable to Sect. 2 of the Sherman Act,[29] as it prohibits abuses of power and outlaws monopolisation proven with evidence of exclusionary conduct.[30] Although national competition authorities are able to enforce competition law, the European Commission does retain ultimate power in issuing a statement of no abuse found in the EU’s market.[31] EU competition law also does not centre on consumer welfare, as it takes in broader considerations of innovation, quality, and choice.[32]


● The principal competition provisions in the UK are the Competition Act of 1998 and the Enterprise Act of 2002. The UK Competition and Markets Authority (CMA) enforces competition law, overseeing the Office of Fair Trading (OFT) and the Competition Commission, as well as small independent sector regulators. In 2018 the CMA also developed a Data, Technology and Analytics (DaTA) Unit, focusing on legislative solutions to competition law cases through data engineering, Machine Learning (ML), and Artificial Intelligence (AI).[33]


● India’s main competition provisions are outlined in the Competition Act of 2002 (the Act), which replaced the previous Monopolies and Restrictive Trade Practices Act of 1969. The Competition Act was also amended in 2007, and again in 2009. Enforced by the Competition Commission of India (CCI), the Competition Act works to promote and protect competition, using measures like premerger notification thresholds.[34] With the fast growing digital market age and the fast decreasing competition, the Competition Law Review Committee (CLRC) was constituted in 2018, which recommended an adapted threshold with broader parameters.[35] The Parliament introduced the Competition Amendment Bill in 2022, introducing a ‘Deal Value Threshold’ (DVT) that would enable the CCI to take ex-ante measures and effectively capture threats to competition and general welfare, although the CCI has not presently released clarified guidelines.[36]


Despite these jurisdictions often approaching matters relating to competition differently, there are certain key notions in competition policy that they have in common, such as ‘monopoly’, ‘mergers and acquisitions’ and ‘collusion’. This review will now introduce each of these notions and the main complications that new technologies pose to current competition laws.


i. Monopolies


A monopoly arises when a single company dominates a particular market, and thus potentially restricts competition. Lack of competition in markets is generally seen as having negative effects on consumers. For this reason, competition law aims to address monopolistic behaviour that would threaten said competition. Some of the undesirable results of monopolies are reduced outputs, higher prices, transfers of income from consumers to producers, and high expenditures by companies.[37] The legal definition of a monopoly is quite complex, causing the identification of a true monopoly to be extremely rare. However, this does not prevent competition law from prosecuting firms for their monopolistic conduct.


Monopolistic conduct has existed for a long time, prominently expressed in trusts such as Standard Oil, and industry-dominating companies such as US Steel. This behaviour harmed small businesses, consumer welfare, and even democracy.[38] The Sherman Act was passed by US Congress in order to combat trusts’ large concentrations of economic power and wealth, becoming a tool against monopolistic conduct. Section 2 of the Sherman act has long been interpreted by courts as not prohibiting every form monopolies take, only those that are “unreasonable.”[39] The most commonly quoted standard for what constitutes a violation of Section 2 of the Sherman Act is from the 1966 case United States v. Grinnell, which defined illegal monopolisation as having two components: “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as consequence of a superior product, business acumen, or historic accident.”[40] The Supreme Court of the United States also generally defines monopoly power as “the power to control prices or exclude competition.”[41] This definition is generally vague, causing courts to historically rely on market share and prices in assessing monopoly power.[42]


With the age of digitalization and the rise of Big Tech, the meaning of what a monopoly amounts to has vastly changed. The tendency of digital markets giving rise to monopolies is a large concern for market competition, and also serves as an explanation of the many competition law proceedings against Big Tech companies like Google, Facebook, Twitter, Amazon, and Apple. This potential of monopoly development stems from digital markets’ features, like incentives in two-sided markets, or incentives from network effects.[43] Moreover, digital markets commonly show increasing returns to scale, a quality that allows marginal costs to be virtually nothing once at a certain size. This allows them to grow rapidly and charge close to nothing to consumers.[44] Of course, as a result, fewer companies will be able to afford to offer their services on digital markets for free, eliminating considerable competition for Big Tech firms.


This leaves Big Tech firms with low marginal costs, decreased competition, and immense market power of a new type: data control. “Big data” is often considered the ‘new currency’ as it plays a vital part in Big Tech’s structural dominance.[45] While the services of these companies are technically free, consumers are paying with the data they allow the platforms to collect. Firms are able to accumulate user data, use it to predict consumer behaviour, fuel marketing campaigns, anticipate competitors’ business strategies, and leverage it in negotiations with suppliers and business partners.[46]


The opportunities for abuses of market power afforded to companies (with the possession of Big Data) are ample. Big Tech firms can also cross-leverage data or financial means to tilt certain markets in their favour.[47] They are able to apply their power and influence onto other market segments, establishing a dominant position without competing on merit. With market power, money, and powerful data, Big Tech companies can bleed into similar markets and crowd out rival firms. The control of specific data sets can prove to be in itself anticompetitive as the sets themselves serve as high barriers to competition.[48] For example, the ridesharing platforms Uber and Lyft have a large advantage in their market due to the concentrated data they collect from ride requests.[49] This blocks out nascent competitors from succeeding in the market, demonstrating how data control alone acts as a barrier to entry.[50] Since a platform with a larger number of ride requests from consumers will attract drivers, the platforms will see faster matching of drivers to riders, and therefore attract even more ride requests.[51] Antitrust authorities struggle to prosecute anticompetitive behaviours in the digital economy, as these new avenues for monopolisation have emerged.[52] Although scholars have argued that there are flaws in authorities’ market share and price metrics for identifying monopolisation,[53] courts and regulatory bodies continue to use them as their primary tools.



ii. Mergers and acquisitions


A “merger” arises when two existing firms agree to consolidate into a new, stronger one. In turn, “acquisitions” are when one party, usually a dominant firm, buys a majority or all of another firm’s shares, leading to a merger between the two firms. The regulation of mergers and acquisitions (M&As) involves the oversight of the consolidation of companies which have the potential impact competition in the relevant markets. Competition agencies rely on the implementation of thresholds to be alerted of significantly sized M&As. From there competition authorities assess whether the M&As serve as a potential threat to competition, and may intervene to block such transactions if necessary.


In particular, scholars have discussed the concept of “killer acquisitions” and the threat they pose to competition.[54] Killer acquisitions refer to acquisitions of nascent rivals by dominant firms. By acquiring smaller firms before their big successes, dominant firms are able to eliminate competition and reap the benefits of innovation. A majority of such killer acquisitions have managed to escape scrutiny from authorities of, for example, the Competition Commission of India (CCI) due to the de minimis threshold, an exemption that allows transactions to slip under the radar if the acquired company has assets or turnover under a certain amount.[55] This loophole has resulted in the dominance of Big Tech firms, serving as a wake-up call for regulators to rein in competition regulation and these killer acquisitions. In some scenarios, Big Tech firms will use “sell or be ruined” threats as a coercion strategy, forcing the smaller firms into M&A agreements.[56] This resulting reduction of smaller companies with the rise of M&As is thus a threat to competition, with the horizontal, vertical, and conglomerate potentials for colluding.


US antitrust law has met a similar issue, with its current approach to merger review failing to prevent killer acquisitions. The US utilizes the Clayton Act, in addition to the Hart-Scott-Rodino (HSR) Act to establish a premerger notification system if the deal meets a certain transaction size. Yet, as a substantial number of these killer acquisitions fail to meet this threshold, leads to a blind spot for competition agencies, as they slip by without any flagging by authorities. US merger policies’ focus on transaction size and preventing growth is ineffective as it only addresses the symptom of dominant firms, and ignores the underlying cause, which is the imbalance distribution of firm fitness.[57] This causes two additional challenges to antitrust enforcement. First, it is difficult to determine ex ante which of the transactions that slipped under the radar are most likely to harm market competition. Secondly, the mere number of transactions to search through is overwhelmingly larger than the number of flagged second requests the FTC and DOJ go through, which has led some to argue that their premerger notification threshold to be futile.[58]


US competition law also faces problems regarding Big Tech “digital business ecosystems” (DBEs), which have been making hundreds of acquisitions that went unchallenged by competition law enforcers despite being arguably illegal under Section 7 of the Clayton Act.[59] Research done by the American Antitrust Institute (AAI) has shown that a central feature to the DBE business model is its “growth by acquisition,” which heavily contributes to its collection of market power.[60] This feature means that smaller up-and-coming digital players can also give rise to concerns about market power, as acquisitions would allow them to grow more rapidly than mature DBEs. “Super-digital firms” have been identified as a further subset of DBEs, which are more valuable and acquisitive than all other firms, posing yet another challenge to competition law enforcement.[61] The acquisition activity of leading public super-digital companies exceeds 700 acquisitions from 1987-2021, with market capitalizations between $200-300 billion, and virtually no antitrust scrutiny generated.[62] These powerful companies’ numerous acquisitions and therefore massive acquired market power, pose a serious threat to competition. Policymakers in the US therefore face a considerable challenge in crafting policy for powerful digital players and their numerous acquisitions.


Technology introduces new complications to competition law due to its transformative nature. Digital markets often exhibit network effects, where the value of a platform or service increases as more users join.[63] This can lead to the emergence of dominant players with significant market power. Additionally, the collection and control of vast amounts of user data by tech companies raise concerns about data privacy and the potential for leveraging this data to gain a competitive advantage.[64] Algorithms, machine learning, and artificial intelligence algorithms can also influence market dynamics and raise questions about their potential for anti-competitive behaviour or discrimination.[65]



iii. Collusion (by algorithms)

Dubbed the ‘supreme evil’ in competition law by the US Supreme Court,[66] “collusion” is one of many anti-competitive practices in which businesses might engage. Competing businesses perform in a coordinated way (for example, by fixing or raising prices, manipulating quantities available), and thus deprive consumers from the benefits of competition.Yet, business rivalry promotes consumer welfare, this is because if all (or most) businesses in one market price their product at the same value, then consumers will not have as much power; prices will be higher and there will be no incentive to increase the quality of products.[67] This is the line of reasoning that underlies the EU’s prohibition of these practices under Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) and the United State’s prohibition of conspiracies or ‘agreements that restrain trade unreasonably’ through the enactment of Section 1 of the Sherman Act.[68]


Despite prohibitions of collusion being well established in competition law, technological advances have created new ways of colluding, for which the line between legal and illegal is particularly difficult to draw. An example of this is the way in which algorithms are used to fix prices. Recently, businesses have started deploying algorithms to set prices in a dynamic manner, so that prices can be calculated and updated with regularity and according to market fluctuations. Though this practice does not present immediate issues to competition policy, as Ezrachi and Stucke note, the use of ‘of a single algorithm by numerous competitors can establish a hub-and-spoke cartel'.[69]United States v. David Topkins serves as a good example for this new kind of collusion.[70] The defendant, David Topkins, used an algorithm to fix prices of the posters he sold online, and conspired with other businesses by agreeing to use the same algorithm to coordinate their activity. Through this course of conduct they were able to collect ‘data to identify the lowest price in the market’ and conspire with other sellers by setting their ‘selling price slightly below the market price’, leading to the inflation of prices.[71] This case was the first of its kind and compelled the court to clarify that under Section 1 of the Sherman Act 'competitors using algorithmic pricing must keep their price setting independent'.[72]


Proposals for Change

 

In the previous section, we have highlighted some of the main changes and challenges to current strategies to regulate competition in markets that scholars have identified as having been created by technology in the last couple of decades. In the present section, we have a different aim: we will turn to some of the proposals that have been set forth in the literature with regard to how policy makers can best address these challenges, if at all.


Proposals for better addressing monopolies in the digital age begin with addressing the definition of monopoly power itself. With the rising influence of data in the marketplace, scholars have advocated for an expanded definition of monopoly power under the Sherman Act.[73] This expanded definition would account for corporate data ownership, with the current proxies of monopoly power (price control and market share) being insufficient.[74] Section 2 of the Sherman Act proclaims the act to “monopolize” or “attempt to monopolize” as illicit.[75] The Supreme Court has generally defined monopoly power as “the control of prices to exclude competition.”[76] The standards are quite vague, but courts have traditionally used market share as the starting point in assessing monopoly power.[77] With Robert Bork’s consumer welfare prescription in the design of the Sherman Act, courts additionally began to cite prices as a gauge of monopoly power.[78] Price control and market share alone fail to encompass potential abuses of power, as pointed out by scholars,[79] such as the leveraging of data ownership, hence the control of data requires attention in the consideration of monopoly power.[80]


Computational antitrust mechanisms have been proposed by scholars as being the most effective in discouraging anticompetitive conduct while minimizing costs and maintenance.[81] Scholars have hence proposed disincentivizing approaches and computational monitoring. Since concentrated data ownership can create barriers to entry, a progressive tax based on user-base size and data control over a firm’s users is an option to counterbalance the advantages of data concentration.[82] This tax would also work to disincentivize firms from entering mergers that concentrate large data sets or customer bases, hence targeting the nature of “killer acquisitions” that often slip under the radar of premerger notification thresholds.[83]


Data control has been identified by scholars as being analogous to monopoly power, but the most problematic type of data control is direct ownership of data.[84] Outright data ownership prevents competitors from accessing the data, and makes auditing of the firm’s data usage impossible.[85] This means direct data ownership serves as a barrier to competition, and makes it difficult to determine if the firm is utilizing the data to lessen competition; data being made unavailable to competitors makes the likelihood of anticompetitive use of the data high.[86]


Third-party data trusts are a new approach to storing and accessing data that reduces the potential for data abuses and facilitates auditing, therefore increasing transparency.[87] Data trusts control a firm’s data set while allowing other entities to extract insights from it without direct access to the raw data.[88] Scholars have proposed that companies using data trusts and allowing relevant regulatory agencies to audit their data use should be presumed as not using their data to attain monopoly power.[89] This solution does not completely eliminate data abuse, but it fosters transparency and accountability while disincentivizing anticompetitive conduct.[90] Another proposed solution to the issue of data control is mandatory data portability and interoperability. This means users would be able to move and share their data across different platforms as they’d like, and data sets could be merged and exchanged across systems. Both these things would facilitate data switching, enable multi-homing, and reduce vendor lock-in effects.[91] The result would be the enhancement of pro-competitive, pro-market entry, and pro-innovation effects, while strengthening data access and data control rights.[92] Scholars have also proposed prohibiting acquisitions by dominant firms altogether, instead opting to grant dominant firms non exclusive rights to an acquired firm’s technology.[93] This would mean dominant firms could only be granted the ability to integrate with the nascent firm, but not purchase exclusivity.[94] This would allow for the firms to gain from each other without preventing the smaller firm from further development or licensing of its technology to others.


With the topic of data control and power comes privacy concerns, and scholars have discussed at length the link between the two. The tensions between privacy law and competition law exist on many levels,[95] making commitment to greater coordination between the two sectors all the more necessary in preventing abuses by so-called “data-opolies”.[96] Scholars have discussed the benefits of utilising merger policy to block the accumulation of data-based market power, by pointing policy toward mergers between firms controlling significant sets of data.[97] This would allow competition authorities to prevent large concentrations of data being controlled by a single firm, effectively accounting for the threat of data-based market power, and eliminating firms’ incentives to accumulate Big Data in the first place.[98] EU antitrust authorities have recognized the important role privacy and data-based market power can play in merger considerations, but have not yet implemented the concepts into merger decisions.[99] In the US, privacy has been traditionally considered a consumer protection issue with no role in merger analysis.[100] However, the FTC has acknowledged intent to incorporate privacy issues into merger analysis, although how they plan to has not been revealed.[101]


Self-preferencing, which is another instance of anticompetitive conduct, can lead to companies exploiting their rule-making position to favor their firm’s interests, therefore raising concerns of dominant power abuse.[102] Self-preferencing also often happens together with leveraging market power into related markets, an additional concern that hurts competition. The European Commission has argued that platforms that serve as “gatekeepers” with rule-setting power have the responsibility to ensure fair market processes ensuring impartiality.[103] Scholars have proposed a so-called “platform neutrality rule” to address the issue of self-preferencing, which would require “gatekeepers” to operate their platforms neutrally, granting equal, fair, and equitable conditions to all companies, products, and services.[104] This would prohibit companies from giving privilege to their own products, and instead ensure open platform access to all other businesses.


In the US, The House Judiciary Committee had similar comments about online market dominance, as it initiated its own bipartisan investigation on Big Tech’s dominance in the digital markets in 2019, and issued a censorious 450-page report the following year.[105] The report chastised lax US antitrust enforcement and advocated for legislative changes to restore antimonopoly goals in Sect. 2 of the Sherman Act and Sect. 7 of the Clayton Act.[106] The report urged for the restoration of the monopoly theory in order to restrain dominant firms from using monopoly power to boost their own platforms in another market, alleging Google to have done it with its horizontal search monopoly to advantage vertical search options.[107]


While reining in Big Tech and the dominant market position the firms have acquired is important, scholars have recognized the importance of looking forward to the wave of up-and-coming firms that continue to acquire and expand their scope. According to scholars, competition policy in the digital sector requires attending to market power accumulation preemptively, and broadly rather than focusing on the largest firms.[108] Basing policy on a forward-looking analysis is beneficial concerning the accumulation of significant market power through acquisitions, by addressing the issue proactively rather than reactively.[109] By accounting for and focusing on the next wave of highly acquisitive digital firms, competition policy regulators can be better equipped for tackling them before they mature.


To address the problematic and numerous mergers and acquisitions (M&As), scholars have critiqued current regulation criteria and proposed various adjustments, markedly to tackle “killer acquisitions.”[110] The Clayton Act of 1914 intended to prevent anticompetitive or potentially monopolistic M&As.[111] It was later amended through the Hart-Scott-Rodino Act of 1976 (HSR Act), which established a premerger notification system for M&As exceeding a certain size.[112]


The current system has evidently failed to prevent “killer acquisitions” with the numerous acquisitions of nascent competitors by dominant firms.[113] Scholars have created an outline of environmental characteristics that harbor monopolies, and from it developed a method in anticipating the effects of a merger on market competition.[114] This method may serve as a more effective early warning system in detecting anticompetitive mergers, facilitating early interventions, and more effectively capturing “killer acquisitions.”[115] Through this model, scholars were able to conclude that considering the various environmental variables, promoting healthier competition required supporting weaker firms, not eliminating dominant ones.[116] This observation is used to demonstrate how the current size-focused approach to merger regulation is ineffective, and overall competition is more effectively fostered through improving the fitness of underperforming firms.[117]


A firm’s “fitness,” which is derived from the ratio of a firm’s growth rate and its number of connections, was shown to be a critical component in the choices of dominant firms in choosing rivals to acquire, thus making it scholars’ recommended proxy for M&A regulation.[118] Scholars also pointed out the opportunity to use fitness to disincentivize anticompetitive deals in the first place.[119] The HSR Act allows the FTC to waive transactions from review if they’re unlikely to violate antitrust law,[120] allowing competition agencies to incentivize deal structures that preserve competition, such as those that minimise the concentration of fitness. This way, fitness can be implemented to both attend to and prevent the harmful types of M&As that have previously slipped by.


Conclusion

 

The age of digitalization and ‘Big Tech’ has vastly impacted the economic landscape, and thus the efficiencies of regulatory agencies in protecting competition, innovation, and general welfare. This review article explored the ways technology transformed markets and redefined business models, as well as the emerging opportunities for harmful anticompetitive conduct, as regulatory loopholes led to the rise of dominating firms. This article contextualised numerous scholarly discussions regarding the evident changes brought by digital platforms, and where competition regulatory bodies succeeded and failed to address these changes. To address such failures, this article reviewed the varying proposals found by scholars to better equip competition agencies to tackle digital firms and their potentially harmful conduct. This article aimed to draw attention to the issues digitalization has brought upon competition law, and emphasise the importance of adjusting legal frameworks in line with these new developments.


References

 

Cases

Am. Needle, Inc. v. NFL, 560 U.S. 183, 189 (2010)

United States v. David Topkins Case 3:15-cr000201-WHO (N.D. Cal. 2015)

United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, (1956)

United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956)

Ginzburg v. Mem’l Healthcare Sys., Inc., 993 F. Supp. 998, 1015 (1997)

United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1996)

Merger Action Group v Secretary of State for business, Enterprise and Regulatory Reform [2008] CAT 36 (10 December 2008)

North Carolina State Board of Dental Examiners v Federal Trade Commission 574 US 494 (2015)

Standard Oil Co. v. United States, 221 U.S. 1, 58-60 (1911)

Verizon Communication Inc v Law Offices of Curtis V. Trinko, LLP 540 US 398 (2004)


Legislation

15 U.S. Code, §2

Enterprise Act, 2002, s 45

Treaty on the Functioning of the European Union, art. 102


Journal Articles & Others

Abbott A., ‘US Antitrust Laws: A Primer’ (2021) Mercatus Centre Policy Brief, <https://www.mercatus.org/research/policy-briefs/us-antitrust-laws-primer

Alexander L.M., ‘Privacy and Antitrust at the Crossroads of Big Tech’ (December 16, 2021). https://ssrn.com/abstract=4013003

Anticipated acquisition by Lloyds TSB plc of HBOS plc: Report of the Secretary of State for Business, Enterprise, and Regulatory Reform(24 October 2008) 27-58

Buxbaum H. L., ‘German Legal Culture and the Globalisation of Competition Law: A Historical Perspective on the Expansion of Private Antitrust Enforcement’ (2005) 23 Berkley J Intl L, 101-106

Chandra Lekha B., 'The Deal Value Threshold: The New Age of Competition Regulation?' (2023), accessed 11 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4461461

Competition Law Review Committee (CLRC) report: July 2019 (2020) Vidhi Centre for Legal Policy. Available at: https://vidhilegalpolicy.in/research/competition-law-review-committee-clrc-report-july-2019/

Court of Justice of the European Union Press Release No 42/11, ‘In the Area of Competition, the Commission Alone is Empowered to Make a Finding That There Has Been No Abuse on the EU’s Internal Market’ (May 3 2011)

Cunningham C., F. Ederer, and S. Ma, ‘Killer Acquisitions’ (2021) 129(3) Journal of Political Economy

Driscoll J.M., ‘AI and Antitrust – When Does an Algorithm Become an Agreement?’ (2023) 13(139) National Law Review

Economides N. and I. Lianos, ‘Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective’ (2021) 17(4) Journal of Competition Law and Economics, 792-801

Elhauge E., ‘How Horizontal Shareholding Harms Our Economy—And Why Antitrust Law Can Fix’ (2020) 10 Harvard Business Law Review 207-86

Ezrachi A., ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1) 49–75

Ezrachi A., M. E. Stucke, ‘Virtual Competition’ (2016) 7(9) Journal of European Competition Law & Practice, 586

Federal Trade Commission, ‘A Brief Overview of the Federal Trade Commission's Investigative, Law Enforcement, and Rulemaking Authority’ (May 2021) https://www.ftc.gov/about-ftc/mission/enforcement-authority> accessed 2 July 2023

Federal Trade Commission, ‘Memorandum: Chair Lina M. Khan to Commission Staff and Commissioners re Vision and Priorities for the FTC’ (Sept. 22, 2021)

Federal Trade Commission, ‘Premerger Notification and the Merger Review Process’, , https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-notification-merger-review

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Footnotes

 

[1] P.G. Picht and B. Freund, ‘Competition (Law) in the Era of Algorithms’ (2018) Max Planck Institute for Innovation & Competition Research Paper No. 18-10, Available at SSRN: https://ssrn.com/abstract=3180550, 1. [2] ibid, 5. [3] ibid, 4. [4] ibid, 4. [5] A. Ezrachi, M. E. Stucke, ‘Virtual Competition’ (2016) 7(9) Journal of European Competition Law & Practice, 586. [6] P. Ibáñez Colomo, ‘What Can Competition Law Achieve in Digital Markets? An Analysis of the Reforms Proposed’ (2020), available at SSRN: https://ssrn.com/abstract=3723188. [7] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 54. [8] P.G. Picht and B. Freund, ‘Competition (Law) in the Era of Algorithms’ (2018) Max Planck Institute for Innovation & Competition Research Paper No. 18-10, Available at SSRN: https://ssrn.com/abstract=3180550, 7-8. [9] M. G. Jacobides, I. Lianos, ‘Regulating platforms and ecosystems: an introduction’ (2021) 30 Industrial and Corporate Change, 1132. [10] A. Ezrachi, ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1) 49–75. [11] Federal Trade Commission, ‘A Brief Overview of the Federal Trade Commission's Investigative, Law Enforcement, and Rulemaking Authority’ (May 2021) <https://www.ftc.gov/about-ftc/mission/enforcement-authority> accessed 2 July 2023. [12] A. Ezrachi, ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1), 52. [13] H. L. Buxbaum, ‘German Legal Culture and the Globalisation of Competition Law: A Historical Perspective on the Expansion of Private Antitrust Enforcement’ (2005) 23 Berkley J Intl L, 101-106. [14] Information Service High Authority of the European Community for Coal and Steel Luxembourg, ‘The Brussels Report on the General Common Market’ (1956); D. J. Gerber, ‘The Transformation of European Community Competition Law?’ (1994) 35 Harvard Intl L J, 97, 102. [15] A. Ezrachi, ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1), 54. [16] F. M. Scherer, ‘A Century of Competition Policy Enforcement’ in Chao Yang Ching (ed), International and Comparative Competition Laws and Policies (Kluwer Law International 2001), 7-9; R. T. Pitofsky, ‘Antitrust at the Turn of the Twenty-First Century: A View from the Middle’ (2002) 76 St John’s L Rev 583; Gerber (n 27), 122-24. [17] North Carolina State Board of Dental Examiners v Federal Trade Commission, 25 February 2015, <http://www.faegrebd.com/supreme-court-decides-north-carolina-istate-board-of-dental-examiners> [18] A. Ezrachi, ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1), 57. [19] Enterprise Act, 2002, s 45. [20] Decision by Lord Mandelson to not refer to the Competition Commission the merger between Lloyds TSB Group plc and HBOS plc under s 45 of the Enterprise Act 2002 (31 October 2008). A challenge to the legality of the decision was dismissed by the Competition Appeal Tribunal: 1107/4/10/08 Merger Action Group v Secretary of State for business, Enterprise and Regulatory Reform [2008] CAT 36 (10 December 2008), despite competition concerns identified by the Office of Fair Trading in Anticipated acquisition by Lloyds TSB plc of HBOS plc: Report of the Secretary of State for Business, Enterprise, and Regulatory Reform (24 October 2008) 27-58. [21] A. Ezrachi, ‘Sponge’, Journal of Antitrust Enforcement, (2017) 5(1), 67. [22] A. Abbott, ‘US Antitrust Laws: A Primer’ (2021) Mercatus Centre Policy Brief, <https://www.mercatus.org/research/policy-briefs/us-antitrust-laws-primer, 2. [23] ibid, 2. [24] ibid, 3. [25] ibid, 3. [26] ibid, 3. [27] ibid, 4. [28] ibid, 3-4. [29] Treaty on the Functioning of the European Union art. 102, May 9, 2008, 2008 O.J. (C1115). [30] C.P. Rogers, ‘Competition Law and the E.U. and U.S. Approaches to Dominant Markets: Will the Gap Narrow?’ (2021) https://ssrn.com/abstract=4178276, 2. [31] Court of Justice of the European Union Press Release No 42/11, ‘In the Area of Competition, the Commission Alone is Empowered to Make a Finding That There Has Been No Abuse on the EU’s Internal Market’ (May 3 2011). [32] I. Lorenzoni, ‘Why do Competition Authorities need Artificial Intelligence?’ (2022) 15(26) YARS 36. [33] ibid, 39. [34] B. Chandra Lekha, 'The Deal Value Threshold: The New Age of Competition Regulation?' (2023), accessed 11 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4461461, 1. [35] Competition Law Review Committee (CLRC) report: July 2019 (2020) Vidhi Centre for Legal Policy. Available at: https://vidhilegalpolicy.in/research/competition-law-review-committee-clrc-report-july-2019/ [36] B. Chandra Lekha, 'The Deal Value Threshold: The New Age of Competition Regulation?' (2023), accessed 11 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4461461, 2. [37] R. Reims, ‘Can Competition Law Rein in Big Tech’ (2022) LSE Business Review Blog, <https://blogs.lse.ac.uk/businessreview/2022/01/05/can-competition-law-rein-in-big-tech/, 1. [38] A. Abbott, ‘US Antitrust Laws: A Primer’ (2021) Mercatus Centre Policy Brief, <https://www.mercatus.org/research/policy-briefs/us-antitrust-laws-primer, 2. [39] ibid, 2-3. [40] United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1996). [41] United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391, (1956). [42] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 54. [43] R. Reims, ‘Can Competition Law Rein in Big Tech’ (2022) LSE Business Review Blog, <https://blogs.lse.ac.uk/businessreview/2022/01/05/can-competition-law-rein-in-big-tech/, 1. [44] ibid, 1. [45] M. 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Khan, Note, ‘Amazon’s Antitrust Paradox’ (2017) 126 (3) YALE L.J, 733-34. [54] C. Cunningham, F. Ederer, and S. Ma, ‘Killer Acquisitions’ (2021) 129(3) Journal of Political Economy, 649. [55] B. Chandra Lekha, 'The Deal Value Threshold: The New Age of Competition Regulation?' (2023), accessed 11 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4461461, 1. [56] M. Wörsdörfer, ‘What Happened to ‘Big Tech’ and Antitrust? And How to Fix Them!’ (forthcoming in Philosophy of Management), accessed 19 June 2023 <https://ssrn.com/abstract=3999405>, 8. [57] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 53-55. [58] ibid, 59. [59] D. L. Moss, D Hummel, ‘Anticipating the Next Generation of Powerful Digital Players: Implications for Competition Policy’ (2022) American Antitrust Institute, accessed 18 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4012999>, 1. [60] ibid, 2. [61] ibid, 9. [62] ibid, 10. [63] R. Reims, ‘Can Competition Law Rein in Big Tech’ (2022) LSE Business Review Blog, <https://blogs.lse.ac.uk/businessreview/2022/01/05/can-competition-law-rein-in-big-tech/, 1. [64] L.M. Alexander, ‘Privacy and Antitrust at the Crossroads of Big Tech\ (December 16, 2021). https://ssrn.com/abstract=4013003, 1. [65] A. Ezrachi, M. E. Stucke, ‘Virtual Competition’ (2016) 7(9) Journal of European Competition Law & Practice, 585. [66] Verizon Communication Inc v Law Offices of Curtis V. Trinko, LLP 540 US 398 (2004). [67] G. Rozent and I. Brodsky, ‘Collusion’ in Global Dictionary of Competition Law, Concurrences, Art. N° 12162 <https://www.concurrences.com/en/dictionary/Collusion-12162> (accessed 18 June 2023). [68] The Supreme Court has clarified that not all agreements that restrict trade are prohibited under the Sherman Act in, see, Standard Oil Co. v. United States, 221 U.S. 1, 58-60 (1911); and more recently, Am. Needle, Inc. v. NFL, 560 U.S. 183, 189 (2010). [69] A. Ezrachi, M. E. Stucke, ‘Virtual Competition’ (2016) 7(9) Journal of European Competition Law & Practice, 586. [70] United States v. David Topkins Case 3:15-cr000201-WHO (N.D. Cal. 2015). [71] J.M. Driscoll, ‘AI and Antitrust – When Does an Algorithm Become an Agreement?’ (2023) 13(139) National Law Review. [72] P.G. Picht and B. Freund, ‘Competition (Law) in the Era of Algorithms’ (2018) Max Planck Institute for Innovation & Competition Research Paper No. 18-10, https://ssrn.com/abstract=3180550, 14-15. [73] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 52, 54-55. [74] ibid, 54. [75] 15 U.S. Code §2 [76] United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 391 (1956). [77] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 54. [78] Ginzburg v. Mem’l Healthcare Sys., Inc., 993 F. Supp. 998, 1015 (1997) [79] E. Elhauge, ‘How Horizontal Shareholding Harms Our Economy—And Why Antitrust Law Can Fix’ (2020) 10 Harvard Business Law Review 207-86, 257-58; Lina M. Khan, Note, Amazon’s Antitrust Paradox, 126 YALE L.J. [80] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 53. [81] ibid, 60. [82] ibid, 60. [83] ibid, 60. [84] ibid, 56, 61. [85] ibid, 56, 61. [86] ibid, 61. [87] A. Pentland and T. Hardjono, ‘Data Cooperatives’, in A. Pentland et al. (eds) Building a New Economy: Data as Capital (MIT Press 2021), [88] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 56, 61. [89] ibid, 61. [90] ibid, 61. [91] P. Swire, & Y. Lagos, ‘Why the Right to Data Portability Likely Reduces Consumer Welfare: Antitrust and Privacy Critique’ (2012). 72(2) Maryland Law Review 335-380. [92] M. Wörsdörfer, ‘What Happened to ‘Big Tech’ and Antitrust? And How to Fix Them!’ (forthcoming in Philosophy of Management), accessed 19 June 2023 <https://ssrn.com/abstract=3999405>, 18. [93] H. Hovenkamp, House Judiciary Inquiry into Competition in Digital Markets: Statement of Herbert Hovenkamp (April 20, 2020). U of Penn, Inst for Law & Econ Research Paper No. 20-38, https://ssrn.com/abstract=3579693, 10. [94] ibid, 10. [95] L.M. Alexander, Privacy and Antitrust at the Crossroads of Big Tech (December 16, 2021). https://ssrn.com/abstract=4013003, 1. [96] A. Ezrachi, M. E. Stucke, ‘Virtual Competition’ (2016) 7(9) Journal of European Competition Law & Practice, 586. [97] L.M. Alexander, Privacy and Antitrust at the Crossroads of Big Tech (December 16, 2021). https://ssrn.com/abstract=4013003, 1. [98] M.E. Stucke & A.P. Grunes, Big Data and Competition Policy, (OUP 2016), 8. [99] N. Economides and I. Lianos, ‘Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective’ (2021) 17(4) Journal of Competition Law and Economics, 792-801 [100] N. Economides and I. Lianos, ‘Restrictions on Privacy and Exploitation in the Digital Economy: A Market Failure Perspective’ (2021) 17(4) Journal of Competition Law and Economics, 801. [101] Memorandum, Chair Lina M. Khan to Commission Staff and Commissioners re Vision and Priorities for the FTC, Federal Trade Commission (Sept. 22, 2021) [102] M. Wörsdörfer, ‘What Happened to ‘Big Tech’ and Antitrust? And How to Fix Them!’ (forthcoming in Philosophy of Management), accessed 19 June 2023 <https://ssrn.com/abstract=3999405>, 20. [103] Commission ‘Competition Law 4.0’. (2019). A New Competition Framework for the Digital Economy. www.bmwi.de/Redaktion/EN/Publikationen/Wirtschaft/a-new-competition- [104] M. Wörsdörfer, ‘What Happened to ‘Big Tech’ and Antitrust? And How to Fix Them!’ (forthcoming in Philosophy of Management), accessed 19 June 2023 <https://ssrn.com/abstract=3999405>, 21. [105] Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google Before the Subcomm. on Antitrust, Commercial, and Admin. Law, H. Comm. on the Judiciary, 116th Cong. (2020). [106] ibid, 392. [107] ibid, 396-97. [108] D. L. Moss, D Hummel, ‘Anticipating the Next Generation of Powerful Digital Players: Implications for Competition Policy’ (2022) American Antitrust Institute, accessed 18 June 2023 <https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4012999>, 3. [109] ibid, 14. [110] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 56. [111] 15 U.S. Code §18. [112] Premerger Notification and the Merger Review Process, FED. TRADE COMM’N, https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/mergers/premerger-notification-merger-review, 27. [113] C. Cunningham et al., ‘Killer Acquisition’, (2021) 129 J. POL. ECON., 649, 685-87. [114] S. C. Lera, A. Pentland, & D. Sornette, ‘Prediction and Prevention of Disproportionally Dominant Agents in Complex Networks’, (2020) 117 PROC. NAT. ACAD. SCI., 27090. [115] R. Mahari, S. C. Lera, A. Pentland, ‘Time for a New Antitrust Era: Refocusing Antitrust Law to Invigorate Competition in the 21st Century’ (2021) 1 Stanford Computational Antitrust, 57. [116] ibid, 58. [117] ibid, 58. [118] ibid, 58. [119] ibid, 59. [120] 15 U.S. Code §18(d)(2)(b).



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