Anti-Trust Legislation's Impact on Web-Based Businesses

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Latest revision as of 16:47, 2 December 2019

Contents


Definition of Antitrust

Want a simplified explanation of the definition of antitrust? Watch this video: https://www.youtube.com/watch?v=Sb_-wfmJnHA&t=25s  

Anti-trust laws are also called competition laws, specifically in Canada. Their main purpose is to prevent large, influential businesses from becoming a monopoly that will restrict competition by taking over the entire industry. [1] A company being a monopoly does not mean they are breaking the law. However, if they are purposefully bulldozing through the other competitors then they are causing an unnatural shift in the market. Thus, anti-trust laws are in place to provide an equal playing field while also protecting consumers.

Consumers are protected from companies charging ridiculously inflated prices just because they are the only option a consumer has. Of course, if there were more competitors in the market, the more power a consumer would have to go from one option to another. This power is missing when there is only one competitor. Thus, anti-trust laws ensure that consumers are not being taken advantage of by taking the potential to misuse the power out of the hands of monopolies. [2]

An equal playing field is created with the enforcement of anti-trust laws, which is essential. Businesses have the ability to run with an idea and will not be pushed out of the market by a dominant organization, who has all the market share and resources to completely obliterate them. With these laws, all companies have a fair chance of success.

More specifically, anti-trust laws stop anti-competitive behaviors such as:

  • price rigging
  • bid-rigging
  • mergers and acquisitions
  • monopolization


Price Rigging

This is an illegal action that occurs when two or more powerful competitors come together to fix or inflate prices in order to earn a higher profit and have the ability to take out the rest of the competition. [3] This usually occurs when two of the main competitors in the same industry join forces and make the competitors have to come to them as they are the only source. With consumers not having many other choices, they are forced to accept the inflated price no matter how ridiculous, depending on the importance of the product and its demand in the market.

Walmart and Sobey's did exactly this. Knowing their position in the market, they decided to work with one another. They increased the price of bread by $1.50 to increase their profits. This may not seem like a large shift however, it cost the average Canadian family an average of $370/year more than before. Both companies were able to rig the price of bread because of it being a basic necessity overall.


Bid Rigging

This takes place when there is an illegal pre-negotiated contract made between two or parties regarding the results of a bid. [4] The deal will entail a guarantee of one party purposefully losing the bid by low balling the offer so that the other party can win. Of course, a contract needs to have consideration, meaning both parties must get something out of it.

Thus, the contract is usually made with the intent that the losing party will be the winning party the next time that there is a bid in which the winning party will now lose on purpose. Companies team up to do this so that both can keep winning one after the other, back to back. They can take advantage of all the benefits while restricting all other competitors from winning a bid.


Mergers & Acquisitions

Mergers and acquisitions can be differentiated based on the type of way companies unite. Mergers take place when two or more companies come together and form one. [5] Acquisitions take place when one company purchases another company and takes it under its umbrella. The two most common types of mergers and acquisitions are vertical integration and horizontal integration.

To visualize what integration looks like, picture a ladder. For vertical integration, imagine the ladder being up-right. If a company were to move to a different step of the ladder, either up or down, they are vertically integrating. For horizontal integration imagine the ladder being sideways. If a company were to shift left or right, they are not moving to a different level and are horizontally integrating.

Thus, vertical integration means merging and acquiring a company on a different level of the supply chain but within the same industry. Horizontal integration means merging or acquiring a company on the same level of the supply chain while which industry the other company was in, does not matter.

An example of vertical integration would be a car manufacturer that builds the body of the car and buys the tires from another company but now merges with or acquires that tire company. The car manufacturer is on a different level of the supply chain than the tire company. A current example of horizontal integration is from when Facebook acquired Instagram because they are both on the same level of the supply chain and within the same industry. [6]


Monopolization

Monopolization is when a company is attempting to become the single, sole firm in an industry with significant and durable market power that inhibits competition. [7] This in comparison to the other market structures which include Oligopoly, Monopolistic Competition, and Perfect Competition. [8]

Oligopoly is a few dominant firms that have differentiated products so there is not much competition (not much more different than a monopoly). Monopolistic competition is getting a little bit closer to what anti-trust laws try to promote. It is a market structure in which there is a large number of small firms that sell similar, but slightly differentiated products so they have market power. There's a little bit of competition here. Perfect competition is the market structure that anti-trust laws push towards which means there are a large number of small firms that have no power over one another.

SWOT Analysis

Strengths

Anti-trust laws encourage healthy competition. This provides an equal playing field for all companies in which power is not a factor. All companies, no matter their size have a fair shot at getting consumers to come their way. This also means that anti-trust laws give consumers options. They will have many different companies to choose from to buy the same or similar product and do not have to pay outrageous prices to one company because they are the only company that can cater to a specific need.


Weaknesses

However, the fear of being a monopoly and being hit with an anti-trust lawsuit discourages the healthy growth of companies. Companies do not have an incentive to grow bigger because they could potentially be dissembled and punished. Additionally, anti-trust laws could potentially be taking away the convenience a company can provide consumers should they be legally allowed to monopolize. For example, there has been a shift from physically shopping in retail stores to online shopping. Thus, a company like Amazon that provides the opportunity to buy just about everything online provides convenience. However, they may be hit with an anti-trust lawsuit soon as they soar through dominating more and more industries.


Opportunities

As customers' needs evolve and shift, this presents an opportunity for authorities to change the law regarding anti-trust. This would help to make it more applicable to today's trends and perhaps to target the big tech companies. The big tech companies consist of Apple, Facebook, Amazon, Google, etc.


Threats

The threat that anti-trust laws present have to do with the vague and broad language that the laws are written in. This creates loopholes. Large corporations are getting away with breaking the law because they are not breaking the portion of the law which says that consumers must be protected. Consumers are approving of the behavior and thus, the companies are scathing by untouched. Like mentioned before, Amazon would be the perfect example of this.

History of US Antitrust Laws

Want a simplified explanation of the history of antitrust? Watch this video: https://www.youtube.com/embed/IcghGCBROR0  

1870-1890s: The "Trust" Movement

Following the Civil War (in the 1960s), the US underwent a period of rapid industrialization. [9] Human labor was replaced by machines in many manufacturing companies and the new nationwide network of railways improved the speed of distribution finished goods throughout the country. This opened many opportunities for financial gain, and wealthy business leaders and investors were able to profit off of economic activity and amass huge fortunes, creating big businesses and giant corporations.

What are Trusts?

Visual Representation of Trust Laws[10]

Trusts are legal entities used to transfer a property from an individual (trustor) to a second party (trustee) for the benefit of a third party (beneficiary). [11]

However, during this time period, corporations began using trust law to legally combine companies in order to create monopolies and enjoy greater economic power and control over the market. [12] The use of trusts caused a trend of rapid consolidation within the market. From 1895 to 1904, more than 1,800 manufacturing firms in the U.S. combined into 157 corporations. [13]


This created a growing disparity between the rich and the poor. There was too much power in too little hands. Big businesses were able to influence the prices of goods, forcing consumers to pay high prices for things they needed on a regular basis (price rigging). [12] Laborers also did not benefit from the economic growth, working long hours at the low pay of 20 cents/hour and with no fringe benefits. [9] Small organizations were put out of business due to the anti-competitive practices of the trust. A sentiment of discontent was growing among the public towards the trusts.

While trusts are rarely used in modern times, the term “antitrust” is still commonly used to refer to U.S. competition laws.

1890-1930s: Breaking up the Trusts

Sherman Act (1890)

In response to the public unrest regarding trusts, the Sherman Act was passed in 1890 to break up these big firms and redistribute power within the industry. It was named after Senator John Sherman, who famously stated “If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life.

The Sherman Act was made to protect trade and commerce by making anti-competitive agreements and monopolies illegal and by establishing the Department of Justice as a regulatory body for antitrust. [12]

Standard Oil (1906-1911)

One of the first major "trust" that was dissolved using the Sherman Act was Standard Oil.

John D. Rockefeller created and formed the first-ever corporate trust in 1882, creating the Standard Oil Company. He combined many state-based companies into one large organization and by 1904, Standard Oil controlled 91% of oil production in the United States.[14] Standard Oil employed many methods to undercut competition including predatory pricing, preferential contracts with railroads to obtain large rebates, and extreme vertical integration. [15]

An antitrust suit was filed against Standard Oil in 1906. After the 5-year court battle, the Supreme Court ruled against Standard Oil and forced the company to break apart into 34 independent companies based on geographic location.[16]

In the present day, many of the former entities of Standard Oil have recouped and became giants of their own right.

Family tree of Standard Oil Trusts[17]
Evolution of Standard Oil[18]

Clayton Act

Even though it was successful in breaking up several large monopolies, such as Standard Oil, the Sherman Antitrust Act was rarely used after its creation.

It was not until Theodore Roosevelt came into office that antitrust was regularly enforced. He was determined to be known as the "trust-busting president" and opened more than 40 lawsuits against trusts.

While new leadership helped to provide momentum for antitrust legislation, there was a short-falling in the Sherman Act that acted as a barrier to adoption. The Sherman act was designed as a reactionary measure and only applied to existing monopolies. There were no conditions in place to prevent businesses from becoming monopolies through mergers and acquisitions and through certain anti-competitive actions (such as price discrimination) that pushes other companies out of the market. As a result, the Clayton Act was established to overcome this short falling. It is more specific than the Sherman Act and focuses on the prevention of monopolies by prohibiting companies from merging or acquiring other companies in an anti-competitive manner. [19]

Number of DoJ Actions by Administration[20]
Number of DoJ Actions by Year[21]

FTC Act

The same year, the FTC Act was enacted, establishing the Federal Trade Commission as a regulatory body. The FTC had the authority to issue "cease and desist" orders to large corporations.

1930-1940s: World War II

With the threat of war looming overhead, the overpowering need for the rapid production of war supplies created a temporary ceasefire in antitrust cases, as cooperation between the government and large corporations became more important.

1940-1970s: Peak Antitrust

During World War II, many industries, such as chemistry and steel, consolidated further to become more efficient with the production of war supplies. Once the war ended, there was again a prevailing issue of a few large players dominating their respective markets. However, this time, because of the war, there was a big fear of communism and the belief grew that competition must be strengthened to prevent another instance of the war. [22] The U.S. Secretary of War, Kenneth Royall, stated that it was the “monopolies [that] soon got control of Germany, brought Hitler to power, and forced virtually the whole world into war”. [23] As antitrust was a tool that enabled competition, it was held in high regard.

As a result, the years following the World Wars formed “the peak antitrust era”, where there were stringent antitrust guidelines that led to extreme scrutiny over almost every merger. Thurman W. Arnold was appointed to the Department of Justice Antitrust Division in 1938 and he increased the division's budget and staff by more than 500% within two years. [24] As a result, the number and range of the DOJ's investigations and prosecutions dramatically increased, jumping from 12 cases in 1939 to 85 cases in 1940, 88 cases in 1941, and 97 cases in 1942. [25]

1970s-Present Time: Modern Antitrust & the Current Landscape

Declining number of antitrust cases[26]

The aggressive nature of the antitrust investigations during the "Peak antitrust era" caused some backlash by academic scholars, who believed that breaking up companies based on size alone isn't necessarily good for the market. As a result, the University of Chicago influenced a piece of literature, called the “Antitrust Paradox” which shifted the focus of antitrust from the size of companies to a focus on consumer welfare. This is the standard that is currently used today. As a result, antitrust has died down over the last 40 or so years and gone essentially dormant. There have been very few cases, and companies have since continued to consolidate.

However, there are a few notable cases from this era, which include the following:

Microsoft v. U.S. Department of Justice (1998)

In 1998, the U.S. Department of Justice (DoJ) filed an antitrust lawsuit against Microsoft, accusing them of monopolizing the internet browser market by offering Internet Explorer for free with its Windows operating system (OS). Many say that this ultimately caused the downfall of their biggest competitor, Netscape.


The Netscape Advantage

In the early 1990s, Netscape offered its relatively developed browser Netscape Navigator for $49. At the time, it was the most effective software for browsing the web. There were many reasons why consumers were willing to pay to use Navigator instead of using Internet Explorer free of charge. First, Navigator was compatible with multiple OSes, while IE was only restricted to Windows. Second, almost all webpages could be viewed with Navigator. IE was considered an early product during the 90s, so it was not as well-developed as Navigator. In some cases, it could not render some sites properly causing the content may appear misaligned. Due to these advantages, website creators were more likely to cater their webpages to Navigator. [27]

1990s Browser Wars [28]

Browser War

There were drastic changes in the internet browser market from the early 1990s to the mid-2000s. Netscape has had some success in the market due to the advantages noted above, peaking at 90% market share in 1996. However, a couple of months earlier (mid-1995), Microsoft launched Windows 95 and IE. They were able to gain a 10% market share after being in the market for only one year. Although Netscape still had its advantages over IE in the mid-1990s, IE continued to heavily innovate and gain market share at an astounding rate. Eventually, Netscape’s advantage could not be sustained as consumers found IE more convenient and worthwhile to use. By 1998, IE overtook Netscape as the leading internet browser. A few years later in 2005, Netscape virtually disappeared from the market.

Antitrust Lawsuit

In Microsoft’s eyes, they were not violating antitrust and were at most a non-coercive monopoly. [29] They argued that users choose to run Windows OS on their computers. In fact, consumers have demonstrated a strong preference for Windows due to its convenience. Furthermore, users are also able to uninstall IE if they would rather use a competitor’s software.

On the other side, the Department of Justice argued that browsers and OS are in different product markets and therefore do not have to be offered together. [30] It would be sufficient if MS offered IE by itself, like how it does with Microsoft Office today. Besides, by bundling IE with its OS, it was essentially forcing consumers and PC manufacturers to have IE on their products.

In June 2000, the judge ruled against Microsoft and required them to divide into two companies (also known as "Baby Bills"), separating the OS and software division. However, Microsoft immediately appealed it. [31] In November 2001, a settlement was reached between Microsoft and the DoJ. Microsoft is required to share its APIs with third parties so they can make their applications work better on Windows OS. [32] However, it is interesting to note that there wasn’t a clause in the settlement that would prevent Microsoft from including other software with its OS in the future, which was the initial objective of this lawsuit.


Evolution of Baby Bells [33]

AT&T v. U.S. Department of Justice (1982)

Before the 1980s, AT&T was the only telecom provider in much of the US. They were able to achieve a monopoly status through vertical integration.[34] AT&T branches off into 3 main companies. Bell Operating Companies provides local telephone services, Bell System provides long-distance services, and Western Electric supplies Bell System with phones and equipment. Additionally, Bell Labs is an R&D lab co-owned by Western Electric and AT&T. The antitrust lawsuit filed by the U.S. Department of Justice was aimed to break-up the control AT&T had over the entire supply chain by removing Western Electric from the rest of AT&T.


As the case progressed, it was highly probable that AT&T was going to lose. Instead of separating its operations from Western Electric, AT&T proposed to break up its local phone monopolies into 7 smaller companies (aka “Baby Bells”) instead (as depicted above).[35] This proposal allows them to keep its long-distance operations, which includes Western Electric and Bell Labs.


Baby Bells

Despite being broken up, most of the Baby Bells ended up consolidating amongst themselves and ended up in AT&T once again, or as Verizon. To this day, AT&T is still one of the world’s largest telecommunication companies.[36]

This was the last example of a giant company being broken up by antitrust, but they ended up getting back together anyways. It is questionable whether it is worth the time and resources to break up giant companies like AT&T. However, we should note that although the Baby Bells consolidated decades later, the break-up gave smaller companies, such as Sprint and MCI, a fair chance to compete. [37] Many believe that this was the reason why Sprint was able to survive to where it is today.

Big Tech companies (2019)

In particular, big tech companies have seen large and unregulated growth in recent years, allowing them to have significant influence over the market.

Whereas only one tech company (Microsoft) made it onto the list of the biggest companies by market capitalization within the U.S. in 2006, all companies at the top in recent years are tech companies.

Growth in Technology[38]

As well, many of these firms have made increasingly sizeable and frequent acquisitions.

 Check out the increasing cost and frequency of acquisitions by the tech giants: https://www.simplybusiness.co.uk/microsites/hungry-tech/

The sheer size of the Big Tech companies (Facebook, Google, Amazon, and Apple) has caused significant concern over whether they have too much influence in recent years. As of 2019, all four companies are being probed for antitrust activity by the Department of Justice and the Federal Trade Commission.

Key Issues with Antitrust

Interpretation

2 methods of interpreting Antitrust

Antitrust legislation was created over a century ago, during a time when markets were easier to define and none of the technology we have today existed. As a result, the acts were intentionally broad and vague so that they could be applied to a wide range of situations and industries. However, in modern times, this creates problems with interpreting the legislation.

In the past 40 years, there has been a shift in the interpretation of antitrust. Antitrust started out in simple terms - big is bad, and the more players in the market, the better.

Traditional antitrust revolve around the concept that firms with dominant market positions can abuse their power to artificially raise prices above market demand. However, for many technology companies, the interpretation is no longer sufficient. For example, companies such as Google and Facebook offer their services for free in exchange for user data, which they use for their advertising businesses. Instead of raising prices, these companies can get around antitrust rules by degrading the quality of intangibles, such as privacy protection. [39]

The modern focus of antitrust is on consumer welfare. However, the use of the term “consumer welfare” has been widely debated. The piece of literature “the Antitrust Paradox”, which originated the term never directly defined how to measure consumer welfare. As a result, the argument of "consumer welfare" has been applied many times in inconsistent ways throughout history. In general, it’s usually on the plaintiffs to prove that consumers have been hurt in a tangible manner. But technology has an increasingly intangible impact on consumers and it’s difficult to quantify the effect of concepts such as privacy violations and excessive surveillance. [39]


Case Example - Amazon

In 2019, Amazon made net sales worth $232.9 billion, which accounts for 49% of e-retail sales. But CEO Jeff Bezos argues that Amazon “remains a small player in global retail…represent[ing] a low single-digit percentage of the retail market.” [40]Bezos argues that Amazon is not only competing with e-commerce companies but also retail giants such as Walmart. In terms of total retail sales, $230 billion is only worth less than 5% of the market size. This begs the question of how regulators should define the market for big tech when companies provide such a wide range of services spanning a large number of different markets.

Despite their huge growth in revenue and scale, Amazon adopts a zero-profit strategy which helps it get around antitrust legislation. The company intentionally hurts their profits by investing in two things: improving customer experience and keeping prices low (by taking revenue from segments with high profitability to cover losses in other segments). As a result, despite high revenues, Amazon manages to keep in line with the “consumer welfare” perspective of antitrust.

Amazon's zero-profit strategy [41]

Enforcement

How antitrust is enforced or whether it's enforced at all depends heavily on the government. Governments are often driven by politics and are heavily influenced by lobbying, the media, and irrational consumer sentiment. They're also slow to react to change, and unfortunately, technology is an industry that is always changing. Therefore, antitrust is only as effective as its leadership.

Case study - the Trump Administration

Under the leadership of the 45th President of the United States, several cases have brought to light key issues with the enforcement of antitrust.

Ford, Honda, BMW, Volkswagen

 Read more regarding the criticism around this case here: https://slate.com/news-and-politics/2019/09/trump-doj-antitrust-ford-honda-volkswagen-bmw.html

Four of the world's largest automakers are being investigated for agreeing to honor regulations set within the state of California's new fuel economy and emissions agreement. [42] Based on the "consumer welfare" interpretation of antitrust, it does not appear that the automakers have taken any wrong action. The agreement to reduce emissions would have a positive impact on consumer welfare because it improves the quality of life by reducing pollution and encourages innovation. The impact of this decision would likely increase automaker's costs rather than improve their profits.

So why are they getting investigated for antitrust? The automakers' decision comes in direct defiance to the Trump administration's proposal to lower environmental standards enacted during the Obama administration. This case has raised criticism to the Department of Justice's ability to enforce antitrust, highlighting concerns that the DoJ is responding to political pressures rather than objectively evaluating cases. The Trump Administration has equally been criticized for abuse of power and "weaponizing the DOJ".[43]

T-mobile & Sprint merger

 Read more regarding the criticism around this case here: https://www.nytimes.com/2019/07/26/opinion/t-mobile-sprint-merger-antitrust.html

On the other hand, T-mobile (the 3rd largest telecommunications provider in the US) & Sprint (4th largest telecommunications provider) has been approved by the Department of Justice in July. [44] While the deal is said to provide the benefit of hastening the development of 5G in the United States, it has been negatively received by several U.S. state attorneys generals, who have sued to block the merger on antitrust grounds.

Critics of this merger suggest the following concerns: [45]

  • Studies conducted by the International Monetary Fund indicates that increasing market power of already-powerful firms can reduce innovation [46]
  • Corporate mergers slow wage growth, reducing competition for workers
  • Competition will be decreased as a result of consolidation, as it provides the power to the company to raise prices. Currently, both T-mobile and Sprint cater to budget-conscious customers and raising prices will have a significant impact on its customer base. It is suggested that the merger will raise costs for customers more than $4.5 billion annually. It is strongly suggested by several senators that President Trump had a role in this merger. [47] T-Mobile's chief executive and company leaders had spent $195,000 on hotel stays at Trump International Hotel in Washington since the approval of the merger. [48] Additionally, Trump is known to have a close relationship with Masayoshi Son, the chair of Sprint's parent company, Softbank.[49]

    Case Study - the FTC & DOJ

    As discussed in the history of antitrust, the U.S. has two main antitrust enforcement agencies: the Department of Justice and the Federal Trade Commission. The responsibilities of the two agencies are, in concept, complementary. The FTC typically focuses on industries where consumer spending is high (such as health care, pharmaceuticals, and food). The DOJ has sole antitrust jurisdiction on certain industries (telecommunications, banks, railroads, and airlines). The DoJ also has sole authority to open criminal inquiries into antitrust. [50]

    However, the recent interest to probing Big Tech firms has revealed major flaws with the antitrust system, as both the FTC and DoJ have spent time "squabbling" over responsibilities. [51] The heads of both agencies have testified that "if given the opportunity to build a regulatory system from scratch... they would not model it off of the U.S.'s bifurcated system."[51]

    As of June 2019, the FTC and DoJ have struck a deal on how to divide oversight of U.S.'s largest tech firms: FTC will have oversight of Facebook and Amazon and the DoJ will investigate Google and Apple. Despite the deal, FTC's Chairman, Joe Simons, brings up the concerns that having two agencies creates duplicate actions which is a drain on resources, stating: "Ideally, you just want one agency from the federal government doing it because the resources that one of us is duplicating on the other could be applied to a completely different enforcement action or investigation." [52]

    Antitrust & IP

    Patents

    Legal Monopolies

    Patents are licenses from governments that give exclusive rights to utilize and profit from innovations. Modern patent law has its basis in the early United States Constitution. The US Constitution states that Congress has the power to promote the progress of science and useful Arts by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries [53]. The government acted on the powers bestowed upon them with the passage of the Patent Act of 1790, the first intellectual property statute in the US, giving exclusive rights to inventions for 14 years. [54] The purpose of this was to provide economic incentives that ensured that resources invested in research and development would allow for greater innovations in the marketplace, without inventors having to fear that their product would be taken and ripped off. The United States took a leading position on patent law with the passage of the Patent Act of 1836 which established a Patent Office to review applications to ensure patent applications were not for already patented inventions [55]. After the modern patent system was implemented, economic growth took off, allowing the United States to take a leading role in scientific discoveries around the world. The patent system also facilitated disclosure of discoveries for the public good through licensing, enabling other researchers to build off of innovations developed by other innovators. Should an innovator not have the resources to develop the product or service themselves they could license off the intellectual property to someone who had the capital to do so.

    Pros & Cons

    Arguments can be made that it seems fair that someone who dedicates time to make a change should stand to make a financial gain from doing so, otherwise why would they invest the time in the first place if someone could just copy the end product. It also seems fair to compensate people or organizations that make these innovations that make our lives better available to the rest of us at a price, a price in which we would only pay if we found the resulting innovation is of a net benefit to us. Arguments can also be made that giving monopoly powers to any individual or organization that is facing a highly inelastic demand curve is prone to excessively high prices and profit margins on goods or services that are quite essential.

    Patent Trolls

    Patent Assertion Entities (aka. Patent Trolls) have come to dominate the intellectual property market as legal entities set up for the sole purpose of collecting patents and then suing other providers of the services claiming patent infringement. Since the Patent Trolls themselves don't offer any products themselves, they can't be targeted by retaliatory patent infringement cases. Besides the frivolous natures of their lawsuits, Patent Trolls also harm society by maintaining control of patents that are not being used to develop and innovate in society.

    Medicine

    The Health Care Industry is a prime example of the tough choices facing intellectual property rights and legally granted exclusivity. Spinal muscular atrophy (SMA) is a debilitating genetic disorder that affects one in every 10,000 people, with the most common type killing the patient within the first two years of their life. [56] A company called Novartis recently developed a drug that can cure this disease but has priced it at US$2.1 Million [57]. This begs the question of whether the patent protections here are a positive impact because if we didn't grant Novartis the right to be the sole producer of this drug then it would not have made economic sense to develop it and everyone with SMA would remain uncured. However, by allowing them exclusive control over their drug production and thus it's pricing, the drug is so expensive that only patients with amazing healthcare coverage or who are from a rich family would receive it. Families that aren't wealthy would be facing a lifetime of crushing debt to pay for the drug or the crippling guilt of not paying for it and knowing that your child is forced to live with this debilitating disease because you wouldn't condemn your financial future. There is no easy answer in this regard, and the same conundrums are present when considering taking anti-trust action against companies that have provided amazing services for users while running monopolies and engaging in other anti-competitive behavior.

    Web Basics

    HTTPS

    Hypertext Transfer Protocol (HTTP) "is a protocol that allows the fetching of resources, such as HTML documents. It is the foundation of any data exchange on the Web and it is a client-server protocol, which means requests are initiated by the recipient, usually the Web browser." [58] The "S" stands for secure, as HTTPS uses HTTP requests and responses using an encryption protocol called Transport Layer Security (TLS) [59]

    DNS

    Domain Name System (DNS) is "the phonebook of the Internet. Humans access information online through domain names, like nytimes.com or espn.com. Web browsers interact through Internet Protocol (IP) addresses. DNS translates domain names to IP addresses so browsers can load Internet resources."[60]

    DOH

    DNS over HTTPS (DOH) is the protocol for mixing in "encrypted DNS traffic with general HTTPS encrypted web traffic so they're indistinguishable". [61] Doing so enables users, who would normally have their DNS traffic be exposed as unencrypted despite browsing using HTTPS, to hide the sites they visit from malicious actors and from their Internet Service Provider (ISP).

    New Issues

    DOH is a much-needed improvement in user security and privacy, but Google rolling it out to its own web browser Chrome [62] causes some issues. Chrome controls 64% of the browser market, with the next largest competitor (Safari) only controlling 15% [63]. If Google were to set chrome browsers to use DOH by default it would improve the privacy and safety of its users, and thus benefit them. However, by making this switch Google would cut out the ISPs from their users' web history, resulting in the Chrome browser (and Google by extension) having a monopoly over its users' Web Browsing Data. Google also has its own DNS called Google Public DNS, which is one of the few DOH compatible DNS [64], further consolidating its control over user Data and their market position. Congress has scrutinized this arrangement[65] over its suspicions that this is anti-competitive behavior. Time will only tell how this case and others are handled by regulatory bodies tasked with enforcing anti-trust legislation, but it poses some tough ethical questions over whether it is acceptable to engage in anti-competitive behavior if it benefits consumers in the at least the short run.

    Pros & Cons Summary

    Pros

    Impact of Antitrust (Big Tech)

  • Boosts innovation
  • Learning from competition
  • Increases customer consumption
  • Allows for specialization
    Impact of Antitrust (Startups)
  • Lowers barriers to entry
  • Allows for more competition based on the merit of work

    Cons

    Impact of Antitrust (Big Tech)

  • Limits economies of scale
  • Stagnates growth
  • Decreases market share
  • May be forced to take lower profit margins
    Impact of Antitrust (Startups)
  • Makes getting acquired by larger companies difficult

    Authors

    Ally Ghakkar Carmen Li Hilary Li Jordan Skrypnyk
    Beedie School of Business
    Simon Fraser University
    Burnaby, BC, Canada
    Beedie School of Business
    Simon Fraser University
    Burnaby, BC, Canada
    Beedie School of Business
    Simon Fraser University
    Burnaby, BC, Canada
    Beedie School of Business
    Simon Fraser University
    Burnaby, BC, Canada

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