What Big Tech Can Expect From Biden Antitrust Enforcers

Antitrust activity involving Big Tech and related industries can surely be expected to increase, and it is wise to be aware of both the particular circumstances of each case that drives the antitrust outcome as well as the broader policy goals these cases serve.

Antitrust cases are decided on their unique facts, but how cases are prosecuted can be influenced by the enforcers selected by the administration in the White House.

Examples include the Federal Trade Commission in January 2017 bringing an antitrust case against Qualcomm, a case that would be prosecuted under new FTC leadership. Similarly, the Department of Justice’s recent case against Google will be prosecuted by new DOJ leaders.

One question that emerges from these cases is what lessons may the new DOJ learn from Qualcomm’s victory (with the prior DOJ Antitrust Division aiding that effort), and should we expect a similar approach to be taken across Big Tech? One top line answer is apparent: technology-based markets are dynamic, and the party whose arguments can embrace the power and scope of technology will have an upper hand.

In the Qualcomm case, the district court judge was persuaded that Qualcomm’s internal documents showed that it was using its alleged monopoly power in chipset sales to be able to demand intellectual property royalties that were too high, according to the FTC and original equipment manufacturers (OEMs). The appeals court disagreed and reversed, finding that Qualcomm has the right to implement an innovative business model by separating its licensing and chipset businesses, and there was no evidence that Qualcomm’s patent portfolio was being used improperly to harm consumers.

In other words, Qualcomm’s technological innovation and resulting selection by its customers was legitimate and non-coercive; that sounds like a theme that the new DOJ will be trying to combat.

Network Effect Phenomenon

This point can also be applied to the other potential actions being considered across Big Tech. One key concept is network effects, which is the idea that a product or service gains additional value as more people use it (such as traditionally with telephones). In these inquires, the question of why network effects exist in a given market (the scope of such a market will be litigated), and whether any alleged action was taken to impact network effects will need to be considered.

In this vein, the DOJ’s recent action to stop Visa’s acquisition of online company Plaid (another lawsuit that will be prosecuted by the new DOJ) echoes this concept. The DOJ argues that while Plaid is not yet a full blown competitor in the online debit market, a major reason why Visa is buying the company is that it is eliminating a nascent competitive threat that is gaining traction through network effects.

These alleged so-called “killer acquisitions” are likely to draw scrutiny, where a determination of the purpose and likely effect of an acquisition will need to be assessed.

Impact on Those Dependent on Big Tech

While the above cases and associated investigations are publicly reported, and thus can be generally followed, an interesting question is what impact these cases have on companies that interact with Big Tech, and what ramifications the actions have on those even outside of technology.

In the Qualcomm case, the FTC’s case in chief was supported by competitive chip manufacturers, cell phone OEMs, and their executives. Apple brought its own action against Qualcomm, which was settled before the FTC’s case was decided by the district court.

Companies will need to assess their individual positions, and determine if its experience in the marketplace is supportive of the arguments either side is making. One of the general themes raised by the DOJ is the fact that Big Tech is ubiquitous, and through these cases, one may be able to determine what that means for the range of companies and consumers who depend upon these technologies.

As for non-technology companies, President-elect Joe Biden indicated during the campaign that there are markets that may be overly concentrated and thus not as competitive as they should be to the benefit of consumers. While the Big Tech cases may take much of the public’s attention on antitrust issues, if there are similar themes or points of enforcement that can be made in other markets such as health care, agriculture, banking, and finance, we can expect such action.

‘No Poach’ Agreements

One enforcement area that arose out of tech and may have an impact on other industries is alleged employment-related misconduct, such as “no poach” deals in which companies allegedly agree with each other not to hire or solicit talent from one another.

Although there has not been a criminal prosecution in this area since the government’s 2016 announcement that it would not hesitate to bring such a case, this is an area that relates to economic opportunity and income inequality that we should expect the DOJ to pursue if the right case presented itself. While non-compete limitations on post-employment and other more common employment restriction clauses are not the subject of potential criminal scrutiny, there may be a renewed agenda geared to limit the impact of such restrictions on employment mobility.

It is commonly said that the purpose of antitrust is not to solve broad societal problems but rather to protect markets and promote competition. However, where societal problems and market protection overlap, serious antitrust may be focused.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners

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David Reichenberg is an antitrust and litigation partner at Cozen O’Connor in New York City. He regularly advises and litigates on behalf of technology companies, and has been named to Global Competition Review’s “40 Under 40” quadrennial list, which recognizes the top antitrust lawyers in the world under 40.