By: Steven C. Salop (Washington Center for Equitable Growth)
The current U.S. economy is increasingly characterized by dominant firms controlling digital platforms. One way that dominant networks maintain or even increase their power is by acquiring nascent or potential competitors that otherwise might become significant competitors by themselves or by joining with other rivals. Now, there is legislation before Congress to correct past anticompetitive presumptions by dominant firms. Reining in acquisitions by these burgeoning monopolies in the digital arena is important to U.S. economic competitiveness and innovation.
Most of the discussion about digital monopolies focus on Alphabet Inc.’s Google unit, Facebook Inc., Apple Inc., and Amazon.com Inc., but there are other digital platforms with substantial market power. In air travel, Sabre Corp. is the dominant platform that connects airlines and travel agents. In auto repair, CCC Intelligent Solutions Holdings Inc. is the dominant platform that connects the auto industry’s original equipment manufacturers and other parts suppliers and repair shops. There are many credit-card-issuing banks, but only three major credit card networks (Visa, MasterCard, and American Express), and the networks’ rules make it impossible for merchants to negotiate lower fees with the card-issuing banks or each other.
Viewpoints on these anticompetitive market conditions largely support greater antitrust scrutiny. Various commentators—including the University of Chicago Booth School of Business’ Stigler Report, Carl Shapiro at the University of California, Berkeley’s Hass School of Business, and me—recommend that there be increased enforcement in this area. Koren Wong-Ervin, an antitrust partner at Axinn, Veltrop, & Harkrider LLP, takes a more skeptical approach…