Big Tech and antitrust regulation
October 2024 | TALKINGPOINT | COMPETITION & ANTITRUST
Financier Worldwide Magazine
October 2024 Issue
FW discusses Big Tech and antitrust regulation with Noah Brumfield at A&O Shearman.
FW: Could you outline some of the major trends shaping the regulatory environment for Big Tech? In what ways are authorities probing competition and participation dynamics in the digital economy?
Brumfield: We are in a truly dynamic time. So much uncertainty today is being driven by politics, geopolitics and technology changes. Populism has rewritten how we talk about antitrust, especially for the business of technology. It is interesting to see fiercely opposed political groups – ultra conservatives and progressives – agreeing that antitrust could be tougher. As an example, we have the Republican vice president candidate backing the chair leading the most progressive Federal Trade Commission (FTC) in decades. Increasingly relevant is the geopolitical-antitrust intersection. We are at an inflection point. Fights over technology supremacy are largely playing out in the export control domain. But do not expect them to be confined there. Trustbusters are increasingly accounting for national security and domestic industry considerations. This will muddle an already muddled antitrust landscape. We cannot discuss trends without mentioning artificial intelligence. Issues around ‘safe’ development, privacy and misinformation will converge with antitrust. These issues are not easily addressed individually and no doubt any discussion of one will entail addressing the other issues.
FW: How are regulatory regimes, such as the European Union’s Digital Markets Act, tackling concerns related to Big Tech?
Brumfield: There are two fundamentally distinct antitrust approaches: the US ex-post enforcement approach, and the European ex-ante regulatory approach. Europe uses antitrust affirmatively as one of several tools to drive industrial or policy outcomes not limited to promoting competition. For example, the Digital Markets Act demands transparency as to how certain platforms use consumer data and how their algorithms work. The ex-ante approach can be more rigid as a result. An upfront regulatory structure requires a lot of sophistication and infrastructure just to navigate. That in itself can create costs that affect how larger, established companies innovate and how and where smaller companies choose to compete. Also, we see in the European approach a willingness to take on an industry segment, such as digital media platforms, with affirmative rules that do not apply to others. It is a reaction to the scale of these platforms, that they should follow different standards than their brick-and-mortar counterparts.
FW: What are the challenges involved in harmonising rules to eliminate anti-competitive effects arising from the business activities of Big Tech companies across the globe?
Brumfield: It will be very challenging to harmonise competition rules. Domestic politics and geopolitics are actually likely to drive greater conflict in how rules are applied. In past decades, there was progress on the part of antitrust enforcers and their governments to align on the underlying policy and rules for enforcement. With competing demands that drive how enforcers and the public think about antitrust, there is less ground for agreement. And, indeed, we are seeing balkanisation as a result – from the heavier hand taken in Europe to regulating tech to how the US and China are weaving national goals into antitrust enforcement.
“Cases before courts are causing a recalibration of how companies leverage their platforms with other products, and how they interact with users and partners.”
FW: How would you characterise antitrust monitoring, investigation and enforcement activity in recent months? What specific areas are in the spotlight for anticompetitive practices?
Brumfield: The enforcement activities of the agencies has been quite mixed. On the merger front, we are seeing a huge uptick in investigations and challenges. That reflects a greater willingness to challenge deals that may not have been challenged in the past. Outside of mergers, it is harder to gauge activity. There are high-profile cases, particularly involving tech. But the uptick is mostly in the US, as Europe and other countries have in past years been much more willing than the US to intervene and bring conduct investigations and enforcement actions. Criminal enforcement and fines for cartel activity remain muted. The most significant area here has been in tackling intercompany agreements to not recruit or hire employees. Yet, while this enforcement trend has moved from the US to other countries, we have also seen the US Department of Justice (DOJ) repeatedly lose these no-poach cases, throwing this enforcement priority into question.
FW: Have any recent, high-profile Big Tech competition cases caught your attention? What lessons can we draw from the nature and outcome of these cases?
Brumfield: Recent wins by governments in bringing conduct cases cannot be understated, especially in the US. In the past several decades, the DOJ and FTC rarely brought a non-cartel conduct case. The number of such cases recently litigated or pending, and the range of legal theories is making some important case law. The greatest impact may be for platform technologies. Cases before courts are causing a recalibration of how companies leverage their platforms with other products, and how they interact with users and partners. Whether these decisions will hold up on appeal, and what happens to the other cases winding their way through the courts will certainly affect how we apply antitrust. This has particular relevance to tech specifically, but also to industry as a whole.
FW: What advice would you offer to Big Tech companies on navigating an increasingly complex competition landscape? What steps can they take to understand, evaluate and mitigate these risks?
Brumfield: Big Tech companies should stick to the basics, and produce a great product and vigorously compete to deliver value and greater productivity. To anticipate antitrust risk, it is important to increase your peripheral vision. This is multidimensional. Tech operates without boundaries and so anticipating reactions across diverse geographies is incredibly challenging, but essential to supporting growth. Product is delivered globally in an instant. Successful compliance and legal strategies are no less global. The singular focus of antitrust on how decisions benefit or harm consumers is in the rearview mirror. It is now critical to anticipate how different constituents – not just customers – might be impacted and react. This is especially so with tech, which operates and depends for success on ecosystems. Anticipating the interrelatedness of regulatory issues is also going to be increasingly important. Good counsel should be aware of not only the antitrust implications of a business decision or agreement, but also any geopolitical ramifications, and how it touches privacy, data risks and environmental costs.
FW: What developments do you expect to see in antitrust regulation for Big Tech going forward? Are authorities likely to enhance their scrutiny of the digital markets?
Brumfield: Greater scrutiny by antitrust regulators seems to be a given. It is hard to see significant legislation in the US comparable to what we see in Europe. But we have been surprised before. More likely, we see continued investigations similar to what we have seen brought by the DOJ and FTC in the last few years in AdTech, developer platforms and online markets. In Europe, the question will be where enforcers set their sights for violations of the recent legislation. Even if regulators hold their fire, recent enforcement actions and legislation is expected to spur activity by the plaintiffs bar. In past years, it was relatively rare for private plaintiffs to bring conduct cases. The changing legal standards coupled with the growth of firms that finance litigation is certain to encourage more private litigation.
Noah Brumfield partners with clients to craft and execute global antitrust strategies while also representing them before US courts, the US DOJ, FTC and various states’ attorney general offices. He provides clients with creative and nimble strategies specific to their business objectives, whether in high-stakes litigation or planning a transformative deal. He can be contacted on +1 (202) 683 3847 or by email: noah.brumfield@aoshearman.com.
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