Don’t Break Up Big Tech Firms: Former Antitrust Regulator

Calls for regulating companies like Amazon, Facebook, and Google out of existence are misguided, says Canada's former competition commissioner.
David McCannApril 22, 2019

The author is a former Commissioner of Competition for the Canadian Competition Bureau.

“The nail that sticks out gets hammered down.” That Japanese proverb — typically used to teach conformity — seems similar to 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.

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The Internet has been the foundation for those and some other tremendously successful companies. Consumer demand for innovative products and services has allowed these technology giants to realize rapid growth and also market preeminence.

Recent times have featured populist backlash against the scale and power of these data monopolies, concern over harmful online content or behavior, cybercrime, and political misinformation.

But breaking up large tech companies, as advocated by Sen. Warren and others, is a flawed solution. 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. One recent report by an expert panel, entitled “Unlocking Digital Competition,” recommended, among other things, a code of conduct for tech firms that would include mandated interoperability. Another report, by the House of Lords Committee on Communications, recommends 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 competition laws by the senior deputy governor of the Bank of Canada, Carolyn Wilkins, and by the Commons Committee, in its on Access to Information, Privacy and Ethics report.

These calls for action followed 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 at the same time, it 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 those. 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 technology 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. So is competition policy that enables long-term economic growth benefiting businesses and consumers alike.

Expropriating the property rights of a successful company is a veritable “nuclear option” in antitrust law, especially when less intrusive remedies exist. The more 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 adviser in the antitrust/competition and marketing group at Canadian law firm Fasken. He formerly served as Commissioner of Competition for the Canadian Competition Bureau.