Can antitrust enforcement protect digital consumers?

By Fiona M. Scott Morton, Yale Insights

The first antitrust laws and enforcement efforts in the United States were taken in response to the emergence of sprawling industrial conglomerations—the “trusts” in “antitrust”—that amassed inordinate power over the growing American economy. John D. Rockefeller’s Standard Oil, for instance, controlled as much as 90% of refined oil production in the country around the turn of the 20th century. The company was broken up under the Sherman Antitrust Act, spawning successor companies that would eventually become Exxon, Mobil, and Chevron.

In recent months, increasing interest has been focused on applying antitrust law to a new breed of “trusts”—the digital conglomerates that have amassed inordinate power over how citizens communicate, shop, and, possibly, cast their ballots. The Department of Justice and the FTC have initiated antitrust investigations of big tech, and in September, 48 state attorneys general announced that they are collaborating on an investigation as well. 

Fiona Scott Morton, the Theodore Nierenberg Professor of Economics at Yale SOM, has been an intellectual standard bearer for the effort to effectively apply antitrust principles originally crafted for an age of steel and oil to the new digital landscape. Earlier this year, she chaired a committee of scholars that studied consumer harms caused by the market power of digital platforms like Google and Facebook, and proposed updated antitrust enforcement and regulation to address them. In August, she launched the Thurman Arnold Project, an initiative funded by the John S. and James L. Knight Foundation and the Omidyar Network that will leverage resources from across Yale to further understanding and action on these issues. “Antitrust enforcement and competition policy are lagging behind academic knowledge, and new energy is required to bring these issues to public attention and into the policy arena,” Scott Morton said in announcing the creation of TAP@Yale. 

Two new papers co-authored by Scott Morton further this agenda by synthesizing findings from academic research in antitrust to explain how lack of competition can lead to decreased innovation and higher prices for consumers—and what can be done about it. Scott Morton describes the goal of her work as “trying to make the economic literature more understandable to policy makers, and trying to demonstrate where the results are applicable to, in particular, competition enforcement and regulatory issues.”

Scott Morton spoke with Yale Insights about how smart antitrust policy and enforcement can protect innovation and prevent exploitative markups.

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