Antitrust laws and the power of Internet giants

Competition law is based on the premise that intervention is warranted if companies cause or may cause significant harm to competition in the market and thereby diminish consumer welfare. While this orthodoxy holds that the size of a company does not occasion concern, this is starting to be challenged with the rise of companies such as Google and Facebook. These companies, says David Unterhalter SC, are of such extraordinary power, size and reach that the traditional rationale of competition law – maximising consumer welfare – is simply too limited to rectify the harms they may cause. In an analysis in Business Day, Unterhalter argues that when looking at these companies, it is not straightforward to 'disentangle' the antitrust problem from the issues of freedom and democracy. ‘The risk is that a single company has resources that can be used to influence political outcomes. And these resources would not be available to all who would use them or would only be available at a price that would make electoral results responsive to the highest bidder.’ He adds the challenge is to consider whether antitrust intervention is the correct response or whether other forms of regulation – for example, to secure privacy rights or ensure fair access to data for campaigning – are the better guarantee of democracy. ‘One response is that securing democracy is too important a value to be put to this choice. If Google and Facebook are monopoly networks whose conduct is unlikely to be disciplined by competition, intervention is warranted to prevent the abuse of economic power by companies that threaten democracy. The logic of this position is that the most extreme antitrust remedy, the break-up of Google and Facebook, would avoid the dangers to democracy that the size of these companies now pose.’ Unterhalter adds that the risk to antitrust is great. Once sectors of the economy are conceived of as 'essential national assets' (such as Google and Facebook), they are not subject to free exchange in the market. ‘Public interest becomes a discretionary executive override and antitrust regulation sacrifices parts of its domain. The issue then is no longer whether intervention is required to make the market work, but rather whether intervention takes place in spite of a transaction doing no harm in the market.’

Full analysis in Business Day