Big Tech Guide for State Lawmakers: Implement an “Abuse of Dominance” Standard for State Antitrust Law

November 9, 2021 State and Local PolicyTech

The Problem:

State antitrust law, like that at the federal level, is inadequate for challenging the actions of Big Tech corporations due to bad case law and bipartisan neglect. Because enforcers and judges have focused exclusively on what’s known as the “consumer welfare” standard, antitrust cases hinge on consumer prices and so-called “efficiency” within businesses, rather than antitrust law’s traditional role of protecting workers and businesses from abusive or anticompetitive tactics by powerful firms.[1]

This has harmed workers and small and medium-sized businesses by allowing a few corporations to become dominant in many sectors of the economy, perhaps most prominently in tech, where many products are superficially “free” and corporations regularly leverage their dominance in one line of business to move into new ones.

The Policy:

State lawmakers can adopt what’s known as an “abuse of dominance” standard for their state antitrust laws, rather than the current consumer welfare standard, which requires stricter proof of monopolization.

Applying an abuse of dominance standard would be a significant change, allowing state enforcers to challenge many of the practices that have led to today’s concentrated economy and that current antitrust law and precedent allow to go unchecked. Lawmakers can also add explicit protection for workers into an antitrust reform bill by ensuring that power over a labor market can be prosecuted as an antitrust violation. While labor market dominance is technically an antitrust violation, it’s rarely enforced.

Model bill:

S933, New York, 2021-2022

The Pushback:

Critics claim that an abuse of dominance standard, while ostensibly aimed at major corporations, will sweep up smaller firms. But most small and mid-sized businesses simply do not have enough market share or sufficient power to be considered dominant. Crucially, being found dominant is not illegal – what’s illegal is abusing that dominance by foreclosing opportunities for other businesses or using power to unilaterally push down wages or otherwise restrict workers’ ability to sell their labor in a free market.

Notes:

[1] “The Courage to Learn: A Retrospective on Antitrust and Competition Policy During the Obama Administration and Framework for a New Structuralist Approach,” American Economic Liberties Project, January 12, 2021, https://www.economicliberties.us/our-work/courage-to-learn/.