The FTC's New Argument for Bringing Tech Giants Back to Earth --- The agency's chief is taking a novel approach to the concept of market power

"For years, activists, lawmakers, lobbying groups, think tanks and most Americans have agreed something should be done about giant tech companies' power. With minor exceptions, no one has figured out how to do it.

Now, U.S. competition regulators at the Federal Trade Commission are getting creative. They're zeroing in on an issue that has been less prominent in the past: how Big Tech dominance harms not consumers, but the businesses that sell goods and services on those tech platforms.

Since mid-1980s Reagan-era reforms of antitrust law, the test for whether a company is a monopolist has been whether its dominance harms consumers -- usually through higher prices or shoddy goods. It has been hard to make that charge stick against companies that offer many of their services free, like Google and Meta Platforms (nee Facebook), or at (usually) competitive prices, like Amazon; or that take a cut of what seems to be a big, competitive market, like Apple does with apps.

The FTC, under its Biden-appointed chairwoman, Lina Khan, has been shifting the terms of the argument, focusing less on harm to consumers or even rivals, and more on how the bigness of Big Tech harms companies that are, in essence, its partners.

To understand, we have to look at an unusual word the FTC has used of late: "monopsony." If a monopoly is a market with one dominant seller, a monopsony is its inverse, a market where one buyer is pre-eminent. Monopolists can gouge consumers. A monopsonist has the same power over sellers.

Big tech's platforms -- the things that have made them so much money -- effectively make them market-controlling middlemen, and the FTC is saying that the tech giants are abusing their positions as, in effect, the ultimate proxy buyers for all users of their platforms.

By this logic, Apple's App Store is the dominant place that app sellers must go to sell their software and services, because globally, it rakes in twice the revenue of its next-biggest competitor, Google's Play store. Amazon wields its power over companies that want to sell goods online. Google and Facebook lord theirs over the publishers selling ad space.

For those suspicious of Big Tech's power, it might seem like the FTC's small band of legal X-wings have found the thermal exhaust port in Big Tech's collective Death Star. The companies frame the situation differently, and see the FTC as the tyrannical Empire imposing its will over a world where they have provided unprecedented opportunities for app developers and other whole new categories of business.

Both Meta and Amazon have tried to have Ms. Khan recused from potential cases involving them, because of her history of writing about why she believes they are monopolists.

Ms. Khan and the FTC, which declined to comment for this column, have laid out their position at length.

But the ills typically associated with weak competition -- such as higher consumer prices and inferior consumer choices -- are difficult to prove in today's tech sector. Regulators might argue that such harms are inevitable with companies accumulating so much market power, but how can they demonstrate that the damage from not intervening now is more than hypothetical?

That's where monopsony enters the discussion. This focus is one of the newest ways the FTC is attempting to establish harms to competition from big tech companies, says Krista Brown, a senior analyst at the American Economic Liberties Project, a liberal think tank with which Ms. Khan has collaborated in the past. Marketplaces where companies are both a referee and a player, setting the terms of how the market works and also participating directly by selling their own goods and services, are of special concern, she adds.

Take, for example, Amazon's e-commerce marketplace. Its share of all online retail in the U.S. grew to more than 40% in 2021, more than five times that of its closest competitor, Walmart.

Its clout is even larger among the third-party sellers that depend on its platform to reach customers. Amazon controls the fees they must pay to list their goods on this vital platform, the rates they pay for advertising and, for many, shipping and fulfillment costs -- not to mention where their goods appear on its site.

Amazon has said previously that regulators' focus on its alleged anticompetitive behavior, and proposed remedies, could amount to "misguided interventions in the free market [which] would kill off independent retailers and punish consumers by forcing small businesses out of popular online stores, raising prices, and reducing consumer choice and convenience."

Meta and Google, which together account for more than half of the U.S. digital advertising market, are arguably in a similar role, but with advertising and consumer data in place of digital and physical goods.

The FTC is suing Facebook, claiming it's a monopolist in the market for social networks. The suit claims that based on years of legal precedent, the company's acquisitions of rivals like Instagram and WhatsApp have been anticompetitive.

Facebook has previously said that it must continually battle world-class competitors in every aspect of its business, and that its customers easily can, and sometimes do, choose to move to another product or service.

Some legal scholars are very skeptical of the FTC's new tactics. "The fact that the agencies are revising the guidelines based on an order from the White House makes this all seem political," says Daniel Crane, an antitrust expert and law professor at the University of Michigan, referring to a July 2021 executive order on competition. "That increases the likelihood for skepticism in the courts."

The FTC clearly wants to go beyond the previous attempts to curtail Big Tech's power, which have mostly been limited to occasional fines representing small fractions of these companies' annual revenues or skirmishes with states over minor fiefs of their empires.

While the FTC may have identified a primary harm of these companies, the two credible remedies it has identified -- withholding approval for future acquisitions by Big Tech, and forcing the giants to divest themselves of previous acquisitions -- may not be sufficient to rein in the power it says these companies already hold.

Laws that might give the FTC other powers are being drafted in Congress, but it isn't clear if, or when, they will come to a vote by the entire chamber, much less be passed by a Congress riven by partisanship.

Even if the FTC continues to make new regulations, the agency has one problem that it can't solve without help from Congress: It doesn't have enough people to do all the things it aspires to.

"The agency is strapped, and it's very resource-intensive to bring suits," says Ms. Brown of AELP. "I think they're just getting their ducks in a row before bringing out a broader plan that will go after larger anticompetitive practices across the tech industry."" [1]

1. EXCHANGE --- Keywords: The FTC's New Argument for Bringing Tech Giants Back to Earth --- The agency's chief is taking a novel approach to the concept of market power
Mims, Christopher. Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 29 Jan 2022: B.2.