Observing all of the policy ordnance leaping from the previous Administration’s Federal Trade Commission (FTC), one has a sense of its relentless ideological certainty. And yet, it is difficult to identify from it a unified or tangible FTC vision for the ideal state of competition in digital markets. What should operators of curated online marketplaces (COMs) and other digital market competitors be doing that would be more pro-competitive and better for consumers? Over the past four years, the FTC has not really said. And over the next four years, the market would benefit from the FTC taking a close look at what it really wants from digital markets.
For example, the FTC has a golden opportunity to revamp its 2023 unfair methods of competition (UMC)policy statement. The statement advises companies their conduct could be “unfair” if it “may be coercive, exploitative, collusive, abusive, deceptive, predatory, or involve the use of economic power of a similar nature” or “otherwise restrictive or exclusionary.” Thus, the “guidance” is really just a list of labels that could plausibly be assigned to a wide range of conduct, especially COM management practices. Current FTC Chairman Andrew Ferguson seems to get that this approach is inconsistent with the FTC’s role as a “cop on the beat.” But, especially given his recent decision to reaffirm the equally unhelpful 2023 merger guidelines, a more forceful rejection of an “everything digital is likely anticompetitive and no we won’t say what’s better” approach—especially as applied to COM management functions and acquisitions—is sorely needed.
Another area is one of the FTC’s highest-profile lawsuits, challenging Amazon’s retail marketplace conduct. The Commission’s philosophical ambivalence carried over to this lawsuit, in which the judge allowed the Commission to seek liability separately from proposed remedies. Despite the popularity of this approach, in cases where the challenged conduct is so facially procompetitive (guaranteed low prices and two-day shipping), fact finders cry out for an understanding of what, exactly, would be more procompetitive and, thus, legal. This is a crucial factor because an antitrust defendant in a unilateral conduct case generally should not be found liable unless the FTC or another plaintiff can identify a more procompetitive way of doing business. Unfortunately, in its haste to decry COM management and hesitation to suggest alternatives, the FTC is not alone. The Department of Justice (DoJ) and private plaintiffs similarly pursued recent lawsuits seeking declarations of antitrust liability while oddly declining to articulate what kind of conduct would be more competitive and, therefore, legal. In the Epic Games v. Google case, considering liability separately from remedies not only led to the wrong outcome practically but also appears to be inconsistent with the 9th Circuit precedent. As we wrote in March 2024:
“When the court decided to bifurcate liability and remedies in Epic Games v. Google, the outcome has been awkward, both practically and legally. On the legal side, a case with strikingly similar facts (Epic Games v. Apple) was thrown out by a court in the same circuit and kicked the rest of the way to the curb on appeal. Epic Games lost so decisively on its main antitrust claims because the court considered the worse—from an antitrust perspective, meaning worse for competition and consumers—alternatives to active online marketplace management in its assessment of liability. On the practical side, it appears the jury in the Google case elided over the tougher questions of market definition when looking at the Sherman Act Section 2 claims to arrive at what seemed to be the crux of the matter: whether Google’s conduct harmed Epic Games. To the extent that Epic Games has not gotten what it wants from Google through negotiating for a lower commission, Epic certainly illustrated its frustration colorfully. But by excluding a discussion of how the Google Play store would be degraded by a proposed remedy—for example, a prohibition on enforcing its distribution terms—the jury may have lacked a framework allowing it to seriously consider whether Epic Games’ plight amounted to actual antitrust liability for Google.”
The European Commission (EC) took the concept further, declaring a basket of COM management functions illegal under its flagship ex-ante framework, the Digital Markets Act (DMA), a regulatory framework Chairman Ferguson recently referred to as a tax on American firms. Implementation of the law provides a case study in unintended consequences resulting from declaring several categories of conduct illegal without thinking through what might be better. But perhaps more importantly, DMA illustrates how difficult it is for governments to articulate exactly what that better path is for software features—suggesting again that illegalizing the conduct in the first place may not be the best path. For example, the EC recently issued guidance translating DMA’s Article 6(7) interoperability mandate to iOS features. The “specification decision” provides that anytime Apple seeks to roll out a new iOS feature update, it must first run that update by all developers to make sure it is “use-case agnostic” and meets any potential request for interoperability. In other words, any single developer has the ability to halt the update process to adjudicate its demands, dramatically slowing down and undermining the iOS and iPadOS feature update processes for all other developers. The result is a guarantee that EU developers can no longer depend on feature updates at the speed of software development—now they must abide a software update process with the speed and disorder of government. Thus, while we encourage policymakers to first understand what they want out of a marketplace, coming up with any old government alternative is not the goal. If close interrogation of the matter leads officials to believe that government is the solution, that course of action must produce a better—not worse—outcome for competition and consumers.
Just as fact-finders—whether they be judges or juries—often need to understand antitrust plaintiffs’ ideal market to evaluate liability, so too does the marketplace desire a sense of the FTC’s broader vision for antitrust. After four years of casual condemnations unmoored from antitrust harms, the FTC has a chance to shed this legacy. Better yet, it should make a radical statement that its shiny new purpose is to cast aside the criticisms, bring on the controversy and: be a “cop on the beat.”