• Allon Advocacy

Could Antitrust Slay Tech?

Then-Microsoft CEO Bill Gates testifies before Congress.

It has been a difficult year for major tech companies.

To demonstrate, consider what the news and polling firm Morning Consult wrote in June 2017: Google and Facebook “are enjoying high favorability ratings among U.S. consumers …” Google at that point had a 93 percent favorability rating among the American public. (The average for the internet services industry at this point was 42 percent.) Facebook had a 71 percent rating, which compared to a 55 percent average for the social media companies.

Oh, how things have changed.

Google was 41st in The Harris Poll’s 2019 corporate reputation rankings after being in the top 10 just a few years ago. Facebook ranks 94th, having tumbled an incredible 43 spots from the 2018 rankings. There is more: a Hart Research poll released this spring found Americans trust Facebook less than the U.S. government – an institution that consistently ranks among Americans’ least-trusted organizations.

Then, last Friday, Hillary Clinton, who has kept a relatively low profile since the 2016 election, speaking out rarely and selectively, publicly argued “Mark Zuckerberg should pay a price for what he is doing to our democracy.”

This, of course, is not the first time a technology company has drawn the ire of federal lawmakers. It is not even the first time that criticism has come at the hands of a Clinton. Though at a 2007 appearance at Microsoft headquarters, former President Bill Clinton claimed “The first time I heard about the Microsoft case was when I read about it in the paper,” his administration carried out an antitrust lawsuit against the tech company. (Wired explained the “groundwork was being laid for a federal antitrust injunction against Microsoft Corp.” early in the Clinton administration.)

Can that case against Microsoft tell us anything about what policymakers’ actions towards the Googles and Facebooks of today’s world might look like?

Yes, but the fact that it does doesn’t mean we will see a similar outcome. (To refresh your memory: the government won its case against Microsoft.)

The case against Microsoft was largely was driven by the government on behalf of one of Microsoft’s competitors, Netscape. Consumers actually were pretty happy with the company up to that point. As Sen. Richard Blumenthal (D-Conn.) and Columbia law professor Tim Wu pointed out in a 2018 New York Times op-ed defending the government’s lawsuit, “Microsoft was a well-liked company and [CEO Bill] Gates was widely heralded as a visionary genius.”

To be sure, it was not just Netscape that wanted action. As the San Francisco Chronicle explains, Silicon Valley was largely aligned against Microsoft and Gates. Technology and social media companies largely are on the same side today.

The subject matter of the Microsoft lawsuit concerned the business of developing and licensing computer operating systems. The U.S. Department of Justice and 20 states alleged Microsoft:

• Monopolized the operating system market and took anti-competitive actions to illegally maintain that monopoly;

• Attempted to monopolize the market for Internet browsers since new browsers would create competition for operating systems;

• Bundled its Internet Explorer browser with Windows to preserve its monopoly; and

• Engaged in a number of other anti-competitive practices.

The Chronicle said these concerns seem “quaint these days” compared to what is at issue today with social media giants and search platforms: data ownership, privacy, and collection. These issues really did not come into play in the 1990s.

That fact does not mean that a case against Google or Facebook could not be structured similarly. All 50 states currently are investigating Google and Mississippi Attorney General Jim Hood, a Democrat who last night lost his race for governor of the state, told CNBC earlier this year that Mississippi’s case against Google would be similar to the suit against Microsoft. Hood said because companies like Facebook and Google “control the pipeline” of data, the state and federal government have a duty not only to protect consumers, but “smaller companies” as well.

When announcing the multi-state investigation against Google, Texas Attorney General Ken Paxton (R) clearly was focused on anti-trust. He argued Google "dominates all aspects of advertising on the Internet and searching on the Internet.” At the time, New York Attorney General Letitia James, a Democrat, told The Wall Street Journal “her office is organizing a bipartisan, multistate antitrust probe into whether social-media company Facebook ‘has stifled competition and put users at risk.’” While obvious, it’s worth noting that Attorneys General Paxton and James are about as ideologically opposite as you could imagine.

Hood also told CNBC, “At some point some court is going to rule to the effect that a person’s private information is the equivalent of their intellectual property and that companies have to pay people for it.” Hood ultimately wants technology companies to adopt best practices for handling user data similar to the European Union’s data policy, CNBC reported.

The DOJ also appears to be gearing up for a suit that looks a lot like the Microsoft case of yesteryear. A July 2019 memo said the agency is planning to examine “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.”

If data privacy and ownership are the crux of the issue, though, some analysts say current U.S. antitrust laws may not provide a remedy.

San Francisco lawyer Stuart Plunkett pointed out to the Chronicle that the issues facing Microsoft fit the “antitrust mold” of using dominance in one area to extend into new ones, but the issues facing Facebook and Google do not. He said, “[W]hen you look at big tech companies and their ability to wield power, for lack of a better word, (by) using information and data from their customers, it’s more difficult to put in an antitrust bucket.” The fact that Facebook and Google are free to users also complicates matters, Plunkett said.

Even experts who think an antitrust cast could be successful believe it will be very difficult. Former DOJ antitrust attorney John Newman told The Hill, “At a high level, I think the law is flexible enough to allow for a successful case to be brought against Google and Facebook … That said, there are going to be some hurdles.”

Another former DOJ prosecutor, Maurice Eitel Stucke, explained to The Hill how an antitrust case based on data collection, protection, and privacy could be won. He argued the DOJ and state attorneys general could find that “rather than elevating price above competitive levels, [companies] degrade privacy protection below competitive levels.” Newman said the government also “would have to show ... that their practices cause people to have to surrender more of their data than they would in a competitive market or look at more advertisements than they would in a competitive market.”

Along with the legal difficulty of mounting its case, there is another issue for Washington to consider: despite being forced to execute changes to its business model, Microsoft not only survived, it thrived. The company was the third U.S. firm to achieve a market capitalization of $1 trillion. The company also is 9th on The Harris Poll’s corporate reputation rankings.

And that might be the ultimate takeaway. Despite significant legal pressure from Washington, Microsoft is still a major player in the technology space and, according to Tim Wu, the government’s antitrust case against the company likely created space for companies like Google to come to market. So, while the federal government and the states may seek to use their anti-trust enforcement authorities to reign in what they perceive to be practices that do not adequately protect consumers, they will not solve questions of data privacy, collection, and protection. That’s up to Congress, and our state legislatures.

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