With Big Tech Bracing for Antitrust Legislation, Here’s What You Need to Know about the Economics of Digital Platforms

James Langenfeld and Chris Ring write that this year will mark a turning point for large tech platforms and how they do business, with numerous bills moving through Congress, a new FTC chair and DOJ antitrust head on record for challenging Big Tech practices, ongoing cases against Facebook and Google, and aggressive actions by the EU and other countries.

Born out of heightened scrutiny of Big Tech and a 16-month investigation by a House subcommittee into the competitive practices of prevailing tech giants—which concluded that several hold monopoly power—new regulatory pressures take aim at stifling anticompetitive mergers, preventing conflicts of interest, and stopping perceived discriminatory behaviors that may hamper competitors to the platforms. The American Innovation and Choice Online Act, for instance, would set new restrictions on how large digital platforms can “unfairly promote themselves and disadvantage rivals.” The bill has gained considerable momentum and, if passed, would represent a significant change to antitrust law.

Even if the bill doesn’t pass, the spotlight on Big Tech won’t dissipate anytime soon. Current legislation is surprisingly bipartisan in its efforts to address the unique challenges Congress and regulatory agencies believe many prominent digital platforms pose to fair competition in digital markets. One report found that a majority of Americans believe these companies don’t act responsibly and should be regulated.

Given the potential for such drastic shifts on the horizon, it’s crucial that policymakers, market participants, and industry observers understand how digital platforms have been defined historically, the benefits they provide, and, consequently, the implications of efforts to redefine them.