Worldwide: Don't Break-up Tech Giants Based On Populist Grandstanding

Last Updated: May 3 2019
Article by John R. Pecman

Antitrust exaggerated backlash against Big Tech is an attack on principles of free markets

"The nail that sticks out gets hammered down." That Japanese proverb – typically used to teach conformity – seems to be the approach advocated by U.S. Senator and Democratic presidential hopeful Elizabeth Warren in her recent call to "break up our biggest tech companies," including Google, Amazon, and Facebook.

There is little question that the Internet has been the foundation for a number of tremendously successful companies. Consumer demand for innovative products and services has allowed these "tech giants" to realize rapid growth and also market preeminence.

There's been a recent populist backlash against the power of these data monopolies, concern over harmful online content or behavior, cybercrime, and political misinformation. But the approach advocated by Sen. Warren and others to break up large tech companies is flawed because it overstates the consequences of being "big," politicizes the role of competition regulators and ultimately will hinder innovation and harm consumers.

Internationally, too, there is a growing call for government action to curb the strength of the tech giants. Most advanced economies are studying the adequacy of competition law over concerns about increasing market concentration in digital network sectors.

In the United States, the Federal Trade Commission has begun public hearings to examine the need for new antitrust approaches. The FTC recently launched a task force to monitor technology markets designed to investigate potential anti-competitive conduct in the digital sector.

The United Kingdom is also examining the role of competition in the digital economy, including two recent reports, first by an expert panel entitled "Unlocking digital competition" which recommended, among other things, a code of conduct for tech firms to include mandating interoperability and the second report by the House of Lords Committee on Communications recommending a public interest test for data mergers.

The European Commission began its study of competition in tech markets by releasing an expert report calling for stricter antitrust enforcement.

In Canada, there have calls for the modernization of Canada's competition laws by the Senior Deputy Governor of the Bank of Canada, Carolyn Wilkins, and by the Commons Committee on Access to Information, Privacy and Ethics report following last year's Facebook/Cambridge Analytica scandal. In response, the government notes that the current competition legislation provides important protections while it studies the results of its National Digital and Data Consultations.

In 2018, during my tenure as Canada's Competition Commissioner, the Competition Bureau published an international, award-winning report entitled, "Big Data and Innovation: Key Themes for Competition Policy in Canada." The study recognized that the emergence of companies that control and exploit data can raise new challenges for competition law enforcement but confirmed the sufficiency of the current antitrust framework in this space. The report clarified that the Competition Bureau will not condemn companies merely because they are "big" or possess valuable big data. A fundamental principle of antitrust is that business success ought not be condemned or punished, even if that leads to dominant firms and concentrated markets. To do otherwise would harm incentives to innovate and deprive markets of important efficiencies like economies of scale and scope. These insights also apply to big data, where efficiencies may relate to network effects.

Competition enforcement agencies need to apply an evidence-based approach and demonstrate actual economic harm before taking action. Big data holds considerable promise to increase economic efficiency and innovate business practices. It's important for antitrust regulators to maintain a degree of humility and recognize that far-reaching, populist proposals are ill-advised.

Antitrust law has limits; it should not be expected to address all social problems. There are other laws and policies to address these. For instance, tax laws are better suited to correct wealth inequality, and privacy laws are better suited to safeguard personal data.

The proposal to dismantle large tech companies by unwinding already completed mergers and to prohibit platform owners from participating on their own platforms is flawed. A respect for property rights and the freedom of contract are fundamental tenets of a free-market economy, along with competition policy which enables long-term economic growth that benefits businesses and consumers alike.

Expropriating the property rights of a successful company is akin to the nuclear option in antitrust law, especially when less intrusive remedies exist. This dramatic approach would cause significant damage to the economy if it were to use antitrust law to break up large companies in an effort to remedy broad public-interest concerns.

Restricting successful companies reduces incentives to innovate, invest and compete. Competition enforcement agencies must be empowered to make evidence-based decisions using economic analysis to deal with antitrust issues. Theories and the quest for political wins should not drive policymakers to take hasty actions in the shaping of our markets. Let's exercise care in wielding our regulatory hammers.

John Pecman is a Senior Business Advisor in the Antitrust/Competition & Marketing group at Canadian law firm Fasken. He formerly served as Commissioner of Competition of the Canadian Competition Bureau.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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