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Big Tech 'Trial of the Century' in U.S. will shape Internet battles in Canada and beyond
A handful of antitrust face-offs, including DOJ's new case against Google, will impact 'Bill C-18' and similar Government vs. Tech Giant contests worldwide
There is a quiet revolution brewing in the United States.
Empowered by the Biden Administration’s resolute direction, American antitrust agencies are finally trying to reign in Big Tech, and their successes or failures will ripple across the world, shaping existing face-offs between other governments and border-straddling Internet platforms.
The U.S. Department of Justice (DOJ) has two antitrust cases pending against Google which, if successful, may break up the firm.
One of them – touted by an expert and advocate as the “First Big Antitrust Trial of the Century” – is scheduled for September.
Meanwhile the Federal Trade Commission (FTC), the consumer protection and antitrust agency, has its own antitrust case pending against Meta, and has aggressively challenged several major mergers, including Microsoft’s $70 billion acquisition of Activision, the video gaming company. And the bell is tolling for Amazon too, with reports that the FTC is finalizing its long-awaited lawsuit against the omnipresent e-commerce behemoth.
Antitrust laws – or competition laws – are meant to curtail business conduct which can harm market competition. Enforcement of those laws generally take two forms: the regulation of specific maneuvers by businesses which harm competitors and the prevention or unwinding of mergers which harm competition.
Historically, the United States has had robust antitrust enforcement. Their legislation is stronger than Canada’s Competition Act, and their enforcement agencies, the FTC and DOJ, are relatively well resourced.
American culture has also been a factor, as it had, for a long time, looked down upon the consolidation of power in the hands of a few. For the majority of the 20th century, the country used its laws to avoid monopolies and oligopolies where it could, and to break up some monopolies as well.
But the direction of American antitrust policy changed drastically following the election of Ronald Reagan.
His administration narrowed the scope of its antitrust enforcement, and in doing so, upended the environment in which business was done.
Apple became what it is today in that environment. So did Amazon. And Google. And Facebook. Exceedingly large conglomerates spanning multiple markets and dominating entire industries.
In the almost borderless digital economy, countries like Canada have found themselves in the crosshairs of these companies' expansion.
Canadians use American social media, search engines and online commerce companies. Canada’s industries rely on and are beholden to these giants to conduct much of their business.
Yet, in contrast to the United States’ recent efforts, the Canadian Government has done little to mitigate Big Tech’s dominance.
“These firms have large amounts of investment in Canada – Canada can seize it, they can arrest executives, they can break up these firms,” Matt Stoller, Director of Research at the American Economic Liberties Project, and a well known advocate for stronger antitrust enforcement, told me in an interview.
“They just decided not to do anything. Canada’s antitrust law sucks.”
Some Canadian experts tend to agree.
The Canadian Competition Bureau, the nation’s antitrust enforcement agency, “cannot be as forceful as its peers in the U.S. and Europe because it is fundamentally hamstrung,” write Vass Bednar and Robin Shaban, in a 2021 National Post opinion piece. Bednar is executive director of McMaster University’s master of public policy in digital society program and Shaban is Research Consultant & Economist.
“Without substantive legislative reform,” the two authors assert, “we can do little more than watch and learn from our international peers.”
Such reform may take place – with a review of Canada’s competition laws ongoing – but it is not yet clear just how firm Canada is willing to get.
Equipping the Competition Bureau with legislative teeth would be quite a deviation from Canadian tradition.
In the meantime, the federal government has tried to address one aspect of Google and Meta’s dominance in the online advertising space, with the Online News Act, otherwise known as Bill C-18.
The issue that Bill C-18 attempts to solve is one of uneven market power. Google and Meta eat up 79% of the estimated $12.3 billion of Canadian online ad revenue (as of 2021).
The two companies own many of the avenues through which that revenue flows, which they have largely obtained through their own consolidation efforts.
Take an element of Google’s advertising business, for example.
Before the Internet, publishers like newspapers and magazines built pretty profitable businesses largely sustained by selling ad space on their printed product.
The Internet disrupted that business model in a bunch of different ways, but the shift online is not exactly what hampered publishers.
Newspaper advertising revenue actually peaked in the U.S. in 2006, as traffic from the open web flooded their sites. But toward the 2010s, the bubble popped and media companies began to flounder.
It is all a bit strange, because online advertising is still an immensely profitable area, even if you were to exclude the advertising placed directly on Google and Meta’s platforms.
Website publishers selling advertising space on their own sites, like torontostar.com, is big business.
In the United States, for example, publishers sell more than five trillion digital display online ads each year, generating more than $20 billion in revenue.
Only, the publishers themselves see a relatively small amount of that money, largely because of Google’s monopolizing actions, according to the DOJ’s lawsuit against Google.
It all has to do with the way that type of advertising is sold online.
Publishers like newspapers only sell some of their ad space directly to advertisers. A huge portion of their ad sales instead flow through a complex web of online intermediaries, which auction off the ad space to advertisers in real time, partly based on user data.
In a nutshell it works like this:
Reader visits nytimes.com → as the page is loading, the ad space next to the article is put up for auction → advertisers, based on a collection of data, bid for the space → page loads, with the winning advertiser’s ad displayed to the reader.
Over the last decade and a bit, Google consolidated a complete chain of the intermediary businesses within which that process can occur, tolling the money as it passes through. And since there is little competition in that market, Google has immense leverage over advertisers and publishers when it comes to pricing those tolls.
The result: advertisers pay more, publishers make less and Google makes a whole lot.
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According to their own internal records, Google makes 35 cents on every dollar that passes through its intermediaries. During the moments when innovative competition managed to undermine Google’s dominance, publishers' revenue spiked, and Google worked to negate the threats, per the DOJ’s allegations based on Google’s internal records.
Because the market is so tilted in Google and Meta’s favour, the Trudeau Government tried to step on the scales on behalf of certain news publishers.
Naturally, this made Google and Meta quite upset. Both threatened to pull Canadian news from their platforms in response to the Bill, and Meta has already carried out that threat.
Many critics of the Bill have said that these companies’ actions are the inevitable result of trying to force private platforms to support news.
University of Ottawa Law Professor Michael Geist called the bill a “massive policy blunder” which “seems certain to cost the Canadian media sector hundreds of millions of dollars.”
Geist has said that he supports Canada taking on Facebook with better privacy and competition laws instead.
Stoller disagrees. He thinks the Online News Act was still a good idea, even if Google and Meta follow through on their threats.
The passing of the Online News Act and subsequent fallout “showed that it’s either the rule of law or the rule of Mark Zuckerberg – that's basically the choice,” says Stoller.
The Canadian government “tried to govern. Mark Zuckerberg has said that Facebook is above the law. What are you going to do next?”
Stoller asserts that the fundamental problem is that “laws are kind of suggestions for these guys.”
“If you want a democracy, you have to hit back hard. The Canadian government needs to hit back really hard.”
But while the Canadian government ponders whether hitting corporations with force is in fact a Canadian virtue, Stoller and other proponents of stronger antitrust enforcement appear to be getting their way in the U.S.
Within months of his election, Biden issued an executive order “on Promoting Competition in the American Economy,” which featured concrete action items that the Government was going to immediately take to fight consolidation across American industry.
Biden also appointed several progressive antitrust experts to some key positions, showing that he means business. And perhaps no one was more of a symbolic appointee than Lina Khan, tapped to lead FTC.
Khan rose to academic fame in 2017 when, then a law student, she wrote a groundbreaking article for the Yale Law Journal making the antitrust case against Amazon.
Khan’s article argues that “the current framework in antitrust… is unequipped to capture the architecture of market power in the modern economy,” and that the foundation of American antitrust law had been subverted over the last half century or so.
The contemporary American framework that Khan criticizes is one that predicates antitrust enforcement on the lowering of prices in the short term.
That narrow goal, Khan argues, fails to capture all of the potential harms of industry consolidation, and, perhaps more importantly, diverges from American legal tradition.
Antitrust was not just about lowering prices, but about protecting markets from “industrial monarchs,” Khan writes. In other words, the foundation of antitrust is “freedom.”
Since her appointment, Khan and the FTC have sued to block several high profile mergers, none of which have been completely successful.
The FTC and the DOJ have also revamped the U.S. merger guidelines – which are legally significant but not binding – to make explicit that they will no longer wave through certain mergers which had been getting the green light for many years.
The reception to this increased regulatory intensity has been mixed, with many commentators applauding it as long overdue, and others insisting that it either won’t work or is bad for business.
Cory Doctorow, a renowned antitrust enforcement advocate, counted 67 Wall Street Journal editorials attacking Khan and her policies since she has taken office. Critics have been eager to point to Khan’s merger challenge record as evidence that her aggressive approach is not worth pursuing.
But proponents point out that the effectiveness of the movement cannot be measured solely on that basis.
They say that the effect of such an aggressive stance stretches beyond the courthouse, chilling the environment around potentially controversial mergers.
Another benefit to the United States’ recent antitrust aggression, Stoller tells me, is that it invites attention and scrutiny. Monopolization thrives behind closed doors, and when you bring lawsuits against companies like Google, their behavior is made public.
“That has a really significant impact on what Google does going forward,” says Stoller.
It must also be said that the biggest American antitrust cases have yet to be tried.
One of the DOJ’s cases against Google, which Stoller has dubbed the “First Big Antitrust Trial of the Century” is set to begin next month.
Another of the DOJ’s cases against Google has been mirrored by the European Union with their own charges that call for a breakup. Meta is dealing with its FTC lawsuit, and Amazon reportedly has one coming too.
The consequences of these cases will not be limited to the U.S. border.
Those interested in the long term health of the Canadian news industry, for instance, should pay close attention to the DOJ’s case against Google’s ad tech business, which has the potential to fracture Google’s dominance in the space.
But Stoller is careful to point out that countries like Canada should not sit idly by, hoping that their big brother across the border will take care of things for them.
If countries cooperate to address issues raised by multinational corporations, it can strengthen the cause, he says.
“It’s a very convenient excuse that lots of countries use, where they say ‘we're too small to do anything. This is on America.’ But it's just that – it's an excuse,” says Stoller.
“Like companies, countries have a lot of power.”
“They just aren't using it.”
Adin Wagner is a freelance journalist trained in commercial litigation.
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