Last month, Texas won the most recent round in its antitrust lawsuit against Google when the federal courts refused to pause a decision to return the lawsuit to Texas. This may bring more action in the case very soon.
Texas is not the only one taking action against Google; it is joined by a bipartisan coalition. Taking part in the Texas lawsuit are red states Arkansas, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota and Utah. A separate lawsuit against Google has been filed by the U.S. Department of Justice and several blue states.
The against Google by Texas and the red states include trying “to kill competition … through an array of exclusionary tactics … to manipulate advertising auctions.” The DOJ’s suit of “monopolizing multiple digital advertising technology products.”
The foundation of both lawsuits is the idea expressed by the DOJ that “An open, vibrant internet is indispensable to American life.” In our digital age, most Americans would agree. The question becomes, though, what an open, vibrant internet looks like and who is responsible for keeping it that way.
Both Texas and the DOJ are using the federal courts to maintain an open, vibrant internet. However, the shifting nature of federal antitrust enforcement should cause Texans to think twice about using this approach.
U.S. antitrust laws originally focused on consumer welfare to maintain open, or competitive, markets. The purpose of the Sherman Antitrust Act, adopted by Congress in 1890, was “To protect the consumers by preventing arrangements designed, or which tend, to advance the cost of goods to the consumer.”
Yet in recent years, federal antitrust enforcement has largely focused on protecting inefficient competitors. For instance, one would have to wade through more than 130 pages of the DOJ’s lawsuit before consumers are even mentioned. Rather, it focuses on Google’s seeking to “eliminate or severely diminish any threat to its dominance over digital advertising technologies.”
The danger of this approach is particularly acute in high-technology markets such as the internet. As consumers reap benefits from rapid increases in efficiency in these markets, innovative companies increase their market share. Under the current antitrust approach, however, these successes can trigger enforcement to protect competitors who are losing market share or profits. This is the case in the Texas suit which uses the growth in Google’s YouTube market share to justify its suit.
To turn the focus from competitors back to consumers in antitrust enforcement will require effort to better understand how markets work and revisions of enforcement doctrines in light of those insights. In other words, it requires regulators and the courts to come to grips with the question of what an open, vibrant internet looks like.
A good place for them to start would be to remember that companies and their profits come and go—today’s behemoth is usually tomorrow’s afterthought. Consumers seeking to satisfy their individual preferences—not the unlawful exercise of market power—are largely responsible for driving increases in market share for companies and, as we have seen lately in several cases, consumers are also responsible for driving market share down. Regulatory efforts to allocate market share to competitors are neither open nor vibrant.
The same can be said of businesses pushing regulators and the courts toward antitrust enforcement against their competitors. Competition over divvying up profits in the legislative, regulatory, and judicial antitrust process focuses on benefiting insiders, not on providing better products and services to consumers.
America will not have an open, vibrant internet if we let the U.S. government determine what that is supposed to look like. Instead, we will achieve that goal if we can stop the federal government from using antitrust laws to protect inefficient competitors. This will allow companies to prosper or fail based on their ability to serve their customers. Texans who want to keep the internet open for business should be wary of turning it over to the federal government.
Bill Peacock is a policy analyst focusing on competitive markets including technology and energy. His experience in Texas government and policy includes identifying and reducing the harmful effects of regulation on the economy, businesses, and consumers.