Monday, February 11, 2019
Assistant Attorney General Makan Delrahim Delivers Keynote Address at Silicon Flatirons Annual Technology Policy Conference at The University of Colorado Law School
The speech is here.
Some of the highlights:
In addition to their many benefits, zero-price strategies also pose challenges for antitrust enforcement.
In the absence of price competition, market definition can be difficult. The traditional analytical test applied by enforcers to define relevant markets, which looks at small but significant and non-transitory increases in price (or “SSNIP”), does not translate directly to a zero-price market. We cannot look at the effects of a five percent increase in price because five percent of zero is still zero. Choosing variables for measuring market shares also can be more complicated where shares of revenue is not an option.
In light of these challenges, and the increased prominence of zero-price strategies in the digital economy, many currently are debating how antitrust enforcement should treat such products and services, especially when offered by a large digital platform.
On one end of the spectrum, some argue that zero-price products and services should be exempt from antitrust scrutiny. They argue that consumers and competition cannot be harmed if users are getting a product for free. An argument Microsoft used, without success, in defending the DOJ’s antitrust action in 1998. Some argue that the benefits of free products and the complexity of the antitrust analysis should lead us to forgo antitrust enforcement in this area entirely.
On the other end of the spectrum, commentators and some foreign antitrust enforcers call for more aggressive enforcement efforts against digital platforms that provide free services. These commentators and enforcers consider the collection of consumer data in exchange for goods to be potentially anticompetitive. Some even propose throwing out the long-standing consumer welfare standard and crafting new rules to address these businesses.
The long history of zero-price strategies teaches us, however, that both of these extreme views are misplaced.
First, we should not exempt zero-price models from antitrust scrutiny and give a free pass to free services. U.S. antitrust laws apply in full to zero-priced products and services. Traditional conduct that is unlawful under the antitrust laws is still unlawful in the zero-price models more prevalent in today’s digital economy.
Second, our long history with zero-price strategies also tells us that we do not need a wholesale revision of the antitrust laws to address competitive concerns in these contexts.
As in all enforcement matters, we should engage in careful case-by-case analyses in which we look closely at the evidence. When appropriate, we can tailor our approach to consider unique characteristics of a zero-price market. The fact that market definition and other issues can be more challenging in the absence of price competition does not mean we should give up on our rigorous, evidence-based approach.