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Limiting Antitrust Misinformation by Increasing Agencies’ Transparency

· March 27, 2020

The antitrust debate gives us an opportunity to think about ways to improve the U.S. competition system.  In this sense, one positive aspect of the debate is that it has proven that there is room for improvement with respect to antitrust agencies’ procedures.  In particular, and to avoid misinterpretations of antitrust authorities’ decisions, it would be promising to see U.S. antitrust authorities increase their transparency when investigations are closed.  The latest blog post published by the Stigler Center is a good example of why increased transparency is needed.

The Stigler Center’s post claims that it is U.S. regulators’ fault that some tech platforms became dominant.  Among other things, the post contains false claims regarding some of the FTC and DOJ’s decisions. More specifically, the Stigler post misrepresents the FTC’s investigation into Google back in 2009, citing an internal FTC memo that was inadvertently leaked to the Wall Street Journal.  The post claims that the FTC’s technical staff concluded that Google’s “conduct has resulted—and will result—in real harm to consumers and to innovation in the online search and advertising markets.”  The post adds that “[…] by some FTC estimates, Google’s search syndication agreements and AdWords limitations foreclose up to 66 percent of the relevant market.” This assertion claiming that the FTC found consumer harm in online search is misleading and misrepresents the unanimous conclusion of the FTC. 

For clarification, the leaked FTC memo from the competition staff makes it clear that they did not recommend bringing a case against search bias. This was also the conclusion of the economic staff, the General Counsel’s office, and ultimately all five FTC Commissioners.

The Stigler post contains other misleading information, but the mere fact that they are referencing a leaked report from the FTC and manipulating the information contained in such a report should serve as a good example of why U.S. authorities should make more of an effort to explain the reasons why they did or didn’t move forward with an investigation.

Imagine that the FTC had published the reasons why it decided to close the Google investigation and the evidence that supported its finding of no harm to consumers in the online search and advertising markets.  Were that the case, the FTC would have avoided much of the criticism that has been raised in the past year regarding their allegedly inactivity. As the former FTC chairman Bill Kovacic explained, the FTC “failed to uphold the intent of a transparent administrative process when the agency did not fully disclose why it decided to close its investigation against Google in 2013.”

In fact Prof. Kovacic and Prof. Hyman have advanced studies regarding institutional design of antitrust agencies, and have concluded that one of the most important factors determining agencies’ success is to have consistent political support over time.  On this topic, both authors note that “An agency is doomed if it lacks a supportive constituency, or if the performance of its duties generates crippling political opposition.”

Certainly, the increasing interest of politicians into the work of the U.S. antitrust agencies and the intense debate around their work would benefit from increased transparency, including these agencies’ ability to explain their actions by publishing statements regarding their decisions to move forward or close investigations.  Critiques like the latest Stigler Center post would be less credible with official explanations from the agencies, and agency observers would not be left to cherry pick quotes from leaked internal documents. By the same token, increased transparency would allow us to more accurately critique whether agencies are performing their duties, and eliminate some of the more futile debates.  Finally, as antitrust agencies in the U.S. and abroad conduct investigations into tech companies, being able to review official published documents explaining agencies’ thinking in previous investigations could help to resolve current cases and enhance the agencies’ work when fulfilling their mission, thus gaining political support.  

Other jurisdictions already provide for enhanced explanations of the investigations they carry out, and it wouldn’t harm the FTC and DOJ to do the same.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.