Warren's Big Tech 'platform utility' antitrust proposal would need thumbs up from Congress, courts

US Senator Elizabeth Warren wants to wrest power from the world’s biggest tech companies, but the Democratic presidential hopeful's plan would require legislation from a Congress increasingly lobbied by Big Tech, and the assent of an increasingly conservative federal judiciary.

The Democrat from Massachusetts outlined her ideas in a post on Medium, marking the first concrete competition policy proposal of the 2020 campaign. Per her plan, any company with global revenue over $25 billion that also offers an online marketplace with third-party vendors would be designated as a “platform utility” and barred from participating on its own platform.

Warren also proposes appointing regulators committed to unwinding seven mergers in which Amazon, Facebook or Google were the dominant parties.

'Platform utilities'

The first half of Warren’s proposal would go beyond merely separating Big Tech platforms from their marketplaces.

She proposes designating a second tier of companies, those pulling in global revenue of $90 million to $25 billion per year, that would be allowed to sell products on their own platforms but would have to allow access to their marketplaces on fair, reasonable and nondiscriminatory basis.

The so-called platform utilities wouldn’t be allowed to transfer or share data with third parties.

“To enforce these new requirements, federal regulators, State Attorneys General, or injured private parties would have the right to sue a platform utility to enjoin any conduct that violates these requirements, to disgorge any ill-gotten gains, and to be paid for losses and damages,” Warren wrote. “A company found to violate these requirements would also have to pay a fine of 5 percent of annual revenue.”

The idea of a platform utility is partly based on the ‘essential facility’ doctrine created by a 1985 Supreme Court decision, Aspen Skiing v. Aspen Highlands Skiing. The controversial ruling found that a company can be required to do business with a rival if it is deemed to control an ‘essential facility’ to which competitors must have access. Courts have yet to take an expansive view of the doctrine, but Warren’s proposal would codify it into law.

It's unclear which federal regulators would enforce the new regulations under Warren's proposal, though there are two likely scenarios.

A set of rigid rules could be handed over to the traditional competition enforcers: the US Department of Justice and the US Federal Trade Commission. But, that could sweep up a much larger set of companies than the ones Warren has set her sights on — Facebook, Google, Amazon and Apple. If every company earning over $25 billion were required to separate itself from its marketplace, companies such as Wal-Mart, CVS and Coscto, among others, could be barred from offering their own generic products.  

Alternatively, Warren could push for a new, sector-specific regulatory body to write and enforce rules effectuating the proposal.

Such a move would not be unprecedented. The US Consumer Financial Protection Bureau was inspired by Warren's thinking. She first proposed the bureau in a Democracy Journal article in 2007 when she was a professor at Harvard Law School. President Barack Obama appointed her as a special advisor to help set up the agency when the Dodd-Frank Act passed in 2010. She was even expected to be its first director before she was met with opposition from Republicans.

The CFPB was created in the national panic over the state of the banking industry after the 2008 financial crisis, but it is not clear that Americans are similarly troubled by Big Tech today.

Warren's plan would face a Congress fueled by tech lobbying dollars. Google, Amazon, Facebook and Apple spent nearly $55 million lobbying Congress in 2018 — up from just more than $9 million in 2010, according to congressional ethics records.  Additionally, tech industry groups spent $13 million on lobbying in 2018, up from just under $10 million in 2010.

Unwound deals

The second half of Warren’s proposal calls for the breakup of seven mergers:

• Amazon-Whole Foods
• Amazon-Zappos
• Facebook-WhatsApp
• Facebook-Instagram
• Google-Waze
• Google-Nest
• Google-DoubleClick

“[M]y administration would appoint regulators committed to reversing illegal and anti-competitive tech mergers,” the senator wrote.

Warren would need to put in place a new head of the DOJ’s antitrust division whom she could order to sue for breakups. Presumably, Trump-era FTC Chairman Joe Simons would step down, as is tradition when a new party takes over the White House; Warren could replace him with a chair committed to her agenda to head a commission with a 3-2 Democratic majority.

But there is no guarantee the FTC, an independent agency, would bring the cases Warren would seek. A Democratic majority on the commission let five of the deals — Amazon-Zappos, Facebook-WhatsApp, Facebook-Instagram, Google-Waze and Google-Nest — go through in the Obama administration.

Assuming Warren were to get the right pieces in place, the suits would eventually make their way into the Federal Circuit. The antitrust agencies would have to show competitive harm created by the mergers resulting in a decrease in consumer welfare. It’s a notoriously high bar to clear, recently illustrated by the DOJ’s failed attempt to stop the AT&T-Time Warner merger. On top of that, they would need to clear such a bar in front of an increasingly conservative federal judiciary being filled up with President Donald Trump’s appointees.

Despite the difficult road ahead of the proposal, one thing is clear: Warren’s statement cements antitrust as a platform issue in the 2020 campaign. Though fellow Democratic hopefuls Senator Amy Klobuchar of Minnesota and Senator Corey Booker of New Jersey have also favored stronger antitrust enforcement, Warren’s plan is the first detailed proposal to be offered.

The companies are undoubtedly monitoring the potential shift in regulatory tides. This week, Amazon.com ended a rule banning US third-party sellers on its platforms from offering lower prices elsewhere. It’s unlikely the announcement was a direct response to Warren’s proposal, however; the company had already ended this practice elsewhere.  

The antitrust discussion in the 2020 campaign gained more steam earlier this week with an announcement from Open Markets Institute. On March 30, Democratic presidential contenders including Warren, Klobuchar, former US Housing and Urban Development Secretary Julian Castro will present their ideas on antitrust and competition at a forum in Storm Lake, Iowa.