2019 Antitrust Year in Review
This year was a busy year in competition, and a busy year for Project DisCo. We covered a lot of emerging trends in antitrust policy on this blog and, looking at the scope of posts broadly, a few overarching themes emerge. I’ve sorted through all of 2019’s posts to determine what we thought the biggest topics were in antitrust. I also included one topic that we did not cover here, because it’s not particularly disruptive. But it was also a big year for good old-fashioned antitrust enforcement.
Here is my 2019 hot list.
Disruptive Competitors Rock the Charts
This blog is about disruptive competition, and it was a good year for disruptive competitors. The year started with Netflix receiving its first Best Picture nomination at the Oscars for Roma, which won three Oscars but not Best Picture. The year ended with broadcast television completely shut out of the Golden Globes, with streaming taking 30 nominations and premium cable coming in next with 18. In other media, Fortnite became a cultural phenomenon and drove competition against traditional media by attracting not just players, but also viewers, on streaming sites like Twitch and Mixer. Fortnite even led to high stakes competition among streaming services, as one of Fortnite’s biggest streamers of all time, Ninja, left Twitch to stream exclusively on Mixer.
Competition in streaming is heating up now that a higher percentage of households subscribe to a streaming service than pay TV. It’s gotten to the point that some consumers think there are too many streaming services. This competition has led to a lot of new original programming, and also a lot of frustration among consumers having to juggle multiple services to find what they are looking for. Video game streaming is going through a similar trend, as newer streaming services are poaching top talent from Twitch and shaking up the industry.
This is interesting to antitrust policy for two reasons. First, it is often said that some industries compete for a market in which the winner will take most of the market share. These markets are usually ones in which network effects or other positive externalities mean that having a lot of competitors is not a desirable outcome. Think operating systems. It’s good to have competition, but too many operating systems would mean that software developers and users would have trouble finding each other. Part of this theory of competition is that there is usually a competitor ready to take the top spot if the industry’s current leader falters, and this drives companies who have high market share to be more competitive than in industries with less churn. These new sources of competition lend support to this theory.
Second, it somewhat challenges our idea of market definitions. If video games can compete against TV and streaming can compete against movie theaters, then there is competitive pressure that would not be taken into account in drawing lines around traditional product markets. This may mean lines need to be drawn differently. It may also mean that it is time to start leaving the traditional market definition behind in favor of other ways of measuring market power.
China was not only a hot topic in trade, but in tech too. Early in the year we reported that Chinese companies saw a big rise in competitiveness in new markets like digital assistants. That competitiveness has only increased, and American tech companies have a lot to worry about. One of the biggest success stories of 2019 was TikTok, a company that was probably responsible for this year’s biggest hit song – Old Town Road – and may have changed music discovery forever. TikTok already has more active users than Twitter and Snapchat, and may pass them both combined in 2020.
This trend could be important in antitrust policy as we think about policies aimed at breaking up American tech firms. I wrote about the potential risks in breaking up American companies while Chinese companies could stand to gain significantly from any vacuum created in the marketplace. The result may just be a shuffling of which big companies are on top. While I was going through the editing process, law professor Dan Crane captured my point in a single tweet.
My new year’s resolutions:
1. Take short positions in Amazon, Google, and Facebook.
2. Take long positions in their competitors in Russia and China.
3. Convince everyone to support Liz Warren for president.
4. Retire to Tahiti.
— Daniel A. Crane (@DanielDancrane) December 20, 2019
Sometimes competition means you get beaten by someone who can do a better job faster and with lower input costs.
Speaking of antitrust policy proposals, 2019 was full of them. Most of the 2020 Democratic presidential candidates have stated positions on antitrust policy, and many of them have released specific plans. While much of the candidates’ antitrust criticism is leveled at the tech industry, quite a few have advocated for far wider enforcement that targets industries from agriculture to drug companies. Some of these proposals have led to DisCo bloggers urging caution. Matt Schruers highlighted the dangers of using utility regulation against tech companies, a category that has grown to even include companies like Walmart. I pointed out that a strict separation rule that barred tech companies from acquiring startups would have trade-offs, and could dramatically change how startups are funded.
2019 also saw a technocratic discussion of antitrust policy that ran alongside the political one. The FTC concluded its series of 14 hearings focused on different aspects of antitrust policy and whether changes are needed. Additionally, former Democratic White House official Jason Furman released his review of United Kingdom competition policy in regards to digital markets, titled “Unlocking digital competition.” This report would probably be seen as aggressive in a normal year, but comes off as modest when many alternate proposals call for breaking up large companies and redesigning industries. Project DisCo also featured a more enforcement-targeted proposal from Stephen Houck, former lead trial counsel in the Microsoft case.
With all the new trends in competition enforcement and policy, it is somewhat comforting that 2019 saw a decent amount of old fashioned antitrust. The FTC is currently litigating a monopolization case against Qualcomm for allegedly “using anticompetitive tactics to maintain its monopoly in the supply of a key semiconductor device used in cell phones and other consumer products.” In merger enforcement, the Justice Department worked out a deal to allow Sprint and T-Mobile to merge that was rejected by more than a dozen states. Those states are now in court fighting the merger. The FTC also fined drugmaker Reckitt Benckiser $50 million for “charges that it violated the antitrust laws through a deceptive scheme to thwart lower-priced generic competition to its branded drug Suboxone.”
Finally, my favorite disruptive competition story of the year was not found in tech, but in the grocery industry. High value and brutally efficient grocery chains like Aldi and Lidl have long fascinated me, as have their ability to beat dominant grocers in the U.S. from Kroger to Walmart. And it’s not just discount grocers that are making a killing. Trader Joe’s has been dominating in sales per square foot. I would recommend reading about these companies if you want to learn how small companies can enter and dominate in markets thought to be stale and unchanging.