Friday, July 22, 2022
Compelled interoperability can be a useful judicial or statutory remedy for dominant firms, including digital platforms with significant market power in a product or service. They can address competition concerns without interfering unnecessarily with the structures that make digital platforms attractive and that have contributed so much to economic growth.
Given the wide variety of structures and business models for big tech, “interoperability” must be defined flexibly. Approaches to interoperability begin with the premise that anything that can be organized within a firm can also be organized in a market, and vice-versa. The key to a good interoperability solution is to permit individual assets to function competitively where that is preferable, but collaboratively when collaboration produces better results. Interoperability can include everything from “dynamic” interoperability that requires real time sharing of data and operations, to “static” interoperability which requires portability but not necessarily real time interactions. Also included are the compelled sharing of intellectual property or other productive assets, or creation of broader and more competitive management within the firm.
Designing such remedies requires identification of the particular structures or practices that are making these markets less competitive than they might be. Interoperability is not the best remedy in all situations, nor even for all of those that involve digital platforms. For example, it is rarely the best remedy for non-dominant assets, even those that are sold on two-sided digital markets.
Tested by these criteria, the proposed American Innovation and Choice Online Act falls short. Without assessing a market power requirement, it would compel interoperability of ordinary competitive products, and in ways that are likely to produce significant private and enforcement costs and to encourage substantial free riding without offering any competitive benefit.