Delrahim on FAANG: Monopoly Isn't Necessarily Bad

Department of Justice antitrust chief Makan Delrahim signaled Monday that the fact that edge provider giants like Facebook or Amazon or Google are huge, or even if they are virtual monopolies, is not necessarily an antitrust issue unless they got that monopoly power through anticompetitive means or use that monopoly power anticompetitively.

As to their size, which in financial terms can be comparable to the GDP of small countries, "many of today’s large digital platforms have grown because they provide innovative and disruptive services that consumers seem to like and want to use," he said.

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The "monopoly is not necessarily a bad thing" message likely went over well with many in that audience given the klieg light Silicon Valley has been under in Washington, with calls from some groups and some legislators to de-fang FAANG, including by breaking them up or at least shaking them up because of their size and power.

Delrahim was delivering the keynote at the annual Silicon Flatirons tech policy conference at the University of Colorado Law School, the text of which DOJ supplied.

He spent some time pointing out that web users have been found to prefer giving up their data for targeted advertising than having to pay for web content and services. "For now, consumers seem to be willing to provide information about themselves so that they receive the product for free, even recognizing that their information will be sold to advertisers in exchange for a zero price. Some consumers even may prefer receiving targeted advertisements that are more likely to be relevant to their needs." Those arguments are ones Silicon Valley keeps making as well.

"The fact that successful companies can reap the benefits of their hard work encourages the next generation of innovators and entrepreneurs and inserts the dynamic competition that best benefits consumers," he said. "Therefore, as the Supreme Court explained [in Verizon vs. Trinko, '[t]o safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.'"

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Delrahim's focus was on the zero-price economy, notably represented by those big online platforms and broadcast services, whose use is free, at least in the sense of no money changing hands between user and content provider.

"There’s a saying that 'If you’re not paying for it, you’re the product,'" he said. "Users of a zero-price product, in some cases, simply may be the 'input' to a final product sold to a different set of consumers. For example, broadcast TV providers use audiences as an input to a product ultimately sold to advertisers. This does not mean we ignore alleged anticompetitive effects for TV viewers, but it does mean we may need to consider effects on advertisers and advertising prices in our holistic analysis."

As for FAANG (Facebook, Apple, Amazon, Netflix, Google) dominance, he said Justice must guard against enforcing away pro-competitive business models, like users willingly providing data as the price of their otherwise "free" service. "The question for antitrust enforcement is not how big the platform is, but whether what the platform is doing harms competition," he said.

Delrahim has said in earlier speeches that while the Googles and Facebooks of the world may appear unassailable, history tells a different story.

"Some critics say that platforms are too big, have too much data, or too many users," he said this week. "We must be vigilant to study the causes and effects of market power. In doing so, we must remind ourselves, however, that an efficient firm capturing unsatisfied customers from an inefficient rival or incumbent is, as the Supreme Court explained, 'precisely the sort of competition that promotes the consumer interests that the Sherman Act aims to foster.' The benefit of our capitalist free market system is that winners and losers are determined by the market, not chosen by the government.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.