Meta Platforms:Regulatory Environment

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Developments

January 2024

January 22, 2023: To comply with the DMA Act, Meta said it will give its EU, EEA and Switzerland Instagram and Facebook users more choices on how they consume its services. In the next few weeks, Facebook Messenger users can choose to link their accounts with Facebook or have separate accounts. Facebook and Instagram users can also choose to menage their accounts separately or have them connected. Users will also be able to choose if to share their Facebook account information with Meta’s Gaming and Marketplace services.

November 2023

November 30, 2023: A coalition of almost 20 consumer protection organizations in Europe has also criticized Meta’s ad-free subscription model terming it as “unfair” and “illegal”. The coalition said they will file a complaint with the network of consumer protection authorities (CPC) today.

November 28, 2023: Advocacy group None Of Your Business (NOYB) has filed a complaint with the Austrian regulator against Meta's ads-free subscription model arguing that it amounts to paying a fee to ensure privacy. "EU law requires that consent is the genuine free will of the user. Contrary to this law, Meta charges a 'privacy fee' of up to 250 euros per year if anyone dares to exercise their fundamental right to data protection," NOYB data protection lawyer Felix Mikolasch said in a statement. "Not only is the cost unacceptable, but industry numbers suggest that only 3 per cent of people want to be tracked – while more than 99 per cent don't exercise their choice when faced with a 'privacy fee,'" the group said. "If Meta gets away with this, competitors will soon follow in its footsteps." The complaint is expected to be forwarded to the Irish Data Protection Commission which oversees Meta.

November 27, 2023: A U.S. federal judge ruled against Meta Platforms in a privacy dispute with the FTC. Meta Platforms wanted the District Court to take over its dispute with the FTC. In May, the FTC accused Meta of misleading parents on how much control they have over their kids' usage of the Messenger Kids app and proposed to tighten the $5 billion settlement it reached with the company in 2019 to prevent Meta from making money off data it collects from the underage users, including from the virtual reality business. The ruling grants the FTC the right to implement the proposed changes. "We are considering our legal options in light of the Court's ruling and will continue to vigorously fight the FTC's unlawful attempt unilaterally to rewrite our agreement," Meta Platforms spokesman said. The FTC declined to comment.

October 2023

November 1, 2023: The European data protection regulators have approved a Europe-wide ban on the use of personal data of Facebook and Instagram users for targeted advertising. Greet Gysen, spokeswoman for the European Data Protection Board told Bloomberg that Ireland’s Data Protection Commission now has two weeks to “impose a ban on the processing of personal data for behavioural advertising on the legal bases of contract and legitimate interest.” Meta said in a statement that the EDPB has been aware of its subscription model for weeks and that they have been engaged with them to arrive at a mutually beneficial agreement but the ban “unjustifiably ignores that careful and robust regulatory process.” Ireland’s Data Protection Commission said its main focus now is to conclude “its detailed assessment of the consent model.” The ban extends that imposed by Norway on Meta Platforms in November.

October 30, 2023: Meta introduces an ad-free subscription plan for Facebook and Instagram users in the EU, European Economic Area and Switzerland to comply with EU regulations on personalized ads. The subscription will cost 9.99 euros per month for web users and 12.99 euros per month for iOS and Android users and will apply to all linked Facebook and Instagram accounts in a user’s Accounts Center until March 1, 2024. From March 1, 2024, the web will attract an additional fee of 6 euros per month while iOS and Android will charge an additional 8 euros each month for each additional account listed in a user’s Account Center. Meta said the Court of Justice of the European Union (CJEU) recognises that a subscription model like this is a valid form of consent for personalized ads. Meta said this subscription model was factored into its most recent business outlook and guidance. “Acting in consultation with its fellow European supervisory authorities, the DPC has been engaged in a detailed regulatory assessment of the consent-based model since it was first proposed by Meta in July. That exercise is being led by the DPC, reflecting its position as the Lead Supervisory Authority for Facebook and Instagram in Europe. The exercise has not yet concluded, and no findings have been made to date. It is due to be completed shortly, at which point the DPC will notify Meta if it considers that its new user offerings are to be implemented is compatible with Meta’s obligations under GDPR,” Ireland’s Data Protection Commission (DPC) told Techcrunch.

October 3, 2023: Meta Platforms wants to charge European users $10.50 a month to use Instagram or Facebook free of ads on desktop and roughly $17 to use both accounts, that's according to the Wall Street Journal. On mobile devices, the company plans to charge around €13 to use either ad-free Facebook or Instagram. The mobile phone plan will factor in Apple's commissions. The Wall Street Journal said Meta detailed the plan to European regulators in September. Meta wants to roll out the plan in the coming months. The New York Times reported last month that Meta was considering coming up with the plan, but had not given the pricing as well as the timeline. Meta spokesperson said Meta believes in “free services which are supported by personalized ads” but looking for “options to ensure we comply with evolving regulatory requirements.” Ireland’s Data Protection Commission as well as the European Commission has not responded to the claims. Europe accounted for 22% of Meta's revenue in 2022.

September 2023

September 11, 2023: Meta starts implementing the Digital Markets Act (DMA) in WhatsApp. WABetaInfo reports that a new Android version of WhatsApp has a new screen called “third-party chats”, which enables users to receive messages from people using other messaging tools.

September 5, 2023: Meta lost a Norwegian appeal case that sought to stop a fine of $93,200 per day starting from August 4 for collecting user data and using it in its targetted advertising. The daily fine is to run for 3 months. The ruling could have wider implications in Europe as Datatilsynet, Norwey's data regulator, plans to refer it to the EU data regulator. "We are disappointed by today's decision and will now consider our next steps," a Meta spokesperson told Reuters.

September 5, 2023: Meta Platforms among those designated as "gatekeepers" of online services by the EU Commission. Under the European Union’s Digital Markets Act (DMA), companies with more than 75 billion euros in market capitalization and 45 million monthly active users are considered as "gatekeepers". Companies labelled as such will be required to make their messaging apps interoperate with that of rivals and allow users to decide which apps to pre-install on their devices. A fine of up to 10% of annual global turnover will be imposed on any company that violates the DMA Act. The penalty can go up to 20% for repeated infringement. The "gatekeepers" will have six months to comply with the DMA obligations.

September 1, 2023: Meta is considering a paid version of Facebook and Instagram with no ads in Europe to combat privacy regulations, that's according to the New York Times. However, it doesn't plan to get rid of the free version of Facebook and Instagram. The New York Times did not indicate how much the new version will cost. Meta has not responded to a request for a comment.

August 2023

August 29, 2023: According to data from Similarweb and Data.ai, the decision by Meta to block news links in Canada has had no impact on Facebook's daily active users as well as time spent on the app. This supports Meta's assumption that news adds little value to the company. Meta had said that less than 3% of its Facebook Feeds come from news. Meta declined to comment on the data.

August 1, 2023: Meta has said that it will seek user consent before allowing businesses to send targeted ads to them. "Today, we are announcing our intention to change the legal basis that we use to process certain data for behavioural advertising for people in the EU, EEA (European Economic Area) and Switzerland from 'Legitimate Interests' to 'Consent'," Meta said in a blog post. The company noted that the change will not result in an immediate impact on its services in the region and that it factored it into its business outlook. "There is no immediate impact to our services in the region. Once this change is in place, advertisers will still be able to run personalised advertising campaigns to reach potential customers and grow their businesses. We have factored this change into our business outlook," it said. It added that it will share more information on how the process will work in practice in the coming months as it engages with the regulator.

July 2023

July 17, 2023: Norway's data protection authority, Datatilsynet, said it will fine Meta $100,000 per day over data breaches unless it takes action aimed at resolving them. The regulator said the fine will start from Aug. 4 and will run until Nov. 3 unless action is taken by Meta. Datatilsynet said Meta can not collect user information such as physical address and use it for targeted advertising. "It is so clear that this is illegal that we need to intervene now and immediately. We cannot wait any longer," the head of Datatilsynet's international section, Tobias Judin told Reuters. Meta said it will review the decision while adding that no immediate impact on its services is expected. The company noted, "We continue to constructively engage with the Irish DPC, our lead regulator in the EU, regarding our compliance with its decision." "The debate around legal bases has been ongoing for some time and businesses continue to face a lack of regulatory certainty in this area." Norway is not a member of the EU but is part of the European single market.

July 10, 2023: The EU and the US have signed a new transatlantic deal that will allow the transfer of user data to the U.S., without causing any safety concerns. “Personal data can now flow freely and safely from the European Economic Area to the United States without any further conditions or authorizations,” EU Justice Commissioner Didier Reynders said at a press briefing in Brussels. However, the European privacy campaigner responsible for the legal challenges over the trans-Atlantic data transfer has dismissed the deal. Max Schrems said he will challenge the latest deal in an EU top court. The transatlantic deal created concerns for tech giants such as Meta. During the latest earnings, Meta warned that if an agreement on the trans-Atlantic EU-US data transfer doesn't materialize, it will be forced to stop offering its services in Europe. Roughly 10% of worldwide ad revenue comes from ads delivered to Facebook users in EU countries.

July 4, 2023: An EU Court of Justice has ruled that Meta must get user consent before sending personalized ads in certain circumstances. Unlike the recent decision by an Ireland court that fined Meta Platforms $425 million and ruled that the company can't use its contracts to justify sending users personalized ads, today's ruling is not appealable. Meta Platforms started using an EU privacy law provision which cites the “legitimate interest” of its business after the former ruling. It also came up with forms which users can use to opt out of the personalized ads. However, the new ruling has stated that the user's interest overrides the firm's " legitimate interest". It further stated that users must give consent freely instead of having to click "yes" to access a service. As such, the ruling will compel the likes of Facebook to ask users to opt into ads that are of interest to them. It also gives the Ireland court a reason to quash the appeal that Meta is making regarding the former ruling. Meta spokesperson said that the company is evaluating the court's ruling and that it will comment further in due course.

June 2023

June 23, 2023: Canada's senate passed a bill yesterday that will require Meta and Google to pay news outlets for content shared on the platforms. Meta confirmed that it will comply with the bill by ending news availability on Facebook and Instagram for Canadian users. “We have repeatedly shared that to comply with Bill C-18, which was passed today in Parliament, content from news outlets, including news publishers and broadcasters, will no longer be available to people accessing our platforms in Canada,” said Lisa Laventure, head of communications for Meta in Canada.

June 2, 2023: Meta tests blocking Canadian users from accessing news content on Instagram and Facebook. The block is in response to a proposed bill that will require tech giants to pay publishers for reporting the content online. The Online News Act is being discussed in the Senate and could be passed this month. Meta said it's ready to permanently block news content for Canadian Facebook and Instagram users if the bill is passed. The temporary block will affect 1-5% of its 24 million Canadian users.

May 26, 2023: To avoid further UK antitrust woes, Meta has given assurances on how it uses ad data to boost its Facebook Marketplace, which includes;

(a) Enabling advertisers to opt out of their advertising data which is used to develop the marketplace.

(b)Meta will train staff to ensure that they don't use advertiser data when creating new products for the UK market that will affect its competitors.

The Competition and Markets Authority (CMA) has until June 26 to consult on these commitments and if they are satisfied, they will close the investigation on Meta platforms.

May 2023

May 22, 2023: The Irish Data Protection Commission announced that it has fined Meta platforms €1.2 billion ($1.3 billion) for transferring user data to the U.S., where it will be exposed to the prying eyes of the American security services. The commission has also asked Meta Platforms to stop " any future transfer of user data to the U.S." within 5 months. Additionally, Meta Platforms has been asked to stop “the unlawful processing, including storage, in the US” of such data within 6 months. The ban was widely expected though its impact has been reduced by the transition phases included in the decision as well as the possibility of a new EU-US data flows agreement that could be operational by June of this year. This ruling applies only to Facebook and not WhatsApp or Instagram but the decision could force Meta to delete vast amounts of EU user data. Meta said they will appeal the decision and that no immediate disruption to Facebook services in the EU is expected. The company said during the latest earnings call that " roughly 10% of worldwide ad revenue comes from ads delivered to Facebook users in EU countries." It also warned last year that if a new transatlantic data transfer framework doesn't materialize, it will be forced to pull its Facebook and Instagram services from the EU.

Antitrust

Background

First, an antitrust law overview will illuminate its political divides and application. Antitrust law, codified via the Sherman Act in 1890, was intended to pursue monopolies raising prices and limiting competition. Initial enforcement focused on labor unions and attacked organized labor instead of increasing competition in product markets (Hovenkamp 2022). Congress passed the Clayton Antitrust Act of 1914 to exempt labor, reflecting antitrust’s intention to support labor while limiting corporate power. Although Supreme Court rulings oscillated regarding the scope of the Sherman and Clayton Acts, enforcement trended upward until the 1970’s (Freyer 2006). Mergers would frequently be blocked, and the standard would follow per se illegality; the merger prima facia increases market share and thus increases consumer prices (Kovacic 2021).

The “consumer welfare standard” reversed enforcement trends by arguing the only relevant consideration is consumer prices (Stones 2018). Specifically, the increase in market concentration must be weighed against the new efficiencies and economies of scale produced by a merger. This ideology meshed with the conservative movement of the 1980’s (Adams and Brock 1988), marked by Reagonomics and free market prioritization. The underlying goal is to reduce government intervention and enable markets to achieve the most efficient outcome that optimizes societal welfare.

Robert Bork’s introduction of the consumer welfare standard – prioritizing only prices when evaluating potential anticompetitive conduct – in the 1970’s would create staggering effects over the next few decades; Bork’s ideology increased market concentration (Abdela and Steinbaum 2018). Although a few corporations controlled most marketplaces – technology (Katz 2021), pharmaceuticals (Shepherd 2018), agriculture (MacDonald et al. 2018), telecommunications (Genakos et al. 2018) etc. – the consumer welfare standard’s detesters struggled to galvanize merger enforcement because consumer prices appeared competitive. Policymakers could sense markets went awry, but articulating the rationale was arduous.

Arguments for Replacing the Consumer Welfare Standard

1. Broader Scope of Antitrust Enforcement:
   • Market Power and Competition: Critics argue that the consumer welfare standard, which focuses on price and output effects, is too narrow. They advocate for a broader approach that considers the overall competitive process and market structure. This includes examining how market power affects innovation, quality, and consumer choice
   • Labor Markets: There is a growing concern that the consumer welfare standard neglects the impact of monopolistic practices on labor markets, including wage suppression and reduced job mobility. A broader standard would address these issues​
2. Addressing Power Imbalances:
   • Economic Concentration: High levels of economic concentration and the dominance of large corporations can undermine democratic processes and political power balance. Replacing the consumer welfare standard could help address these broader social and economic concerns
   • Non-Price Harms: The current standard often overlooks non-price harms such as reduced privacy, lower quality, and diminished consumer choice, which are significant in digital markets dominated by tech giants like Google, Amazon, and Facebook​
3. Historical Context and Flexibility:
   • Original Intent of Antitrust Laws: Advocates for change argue that the original intent of antitrust laws was broader than consumer welfare. They believe that restoring this broader intent would allow for more effective enforcement against anti-competitive practices​

Arguments Against Replacing the Consumer Welfare Standard

1. Predictability and Clarity:
   • Legal Certainty: The consumer welfare standard provides a clear and predictable framework for courts and businesses. Changing the standard could lead to increased uncertainty and litigation, making it harder for businesses to understand compliance requirements​
   • Economic Efficiency: Proponents argue that focusing on consumer welfare, primarily through price effects, promotes economic efficiency and benefits consumers directly. They believe that deviating from this focus could harm economic efficiency and lead to higher costs for consumers​
2. Complexity and Implementation:
   • Measurement Challenges: Expanding the scope of antitrust enforcement to include non-price factors and broader social impacts could be difficult to measure and enforce. The consumer welfare standard, while not perfect, offers a more straightforward and measurable criterion​
   • Judicial Expertise: Courts are more experienced and equipped to handle cases based on economic analysis of price and output effects. A broader standard might require expertise in assessing more complex and less quantifiable impacts, complicating judicial proceedings​
3. Incremental Improvements:
   • Improving Existing Framework: Some argue that instead of replacing the consumer welfare standard, it would be more practical to improve its application. This includes better integration of considerations like innovation and potential harm to competition within the existing framework​

Courts and Laws

Sherman Antitrust Act of 1890

The Sherman Antitrust Act refers to a landmark U.S. law that banned businesses from colluding or merging to form a monopoly. Passed in 1890, the law prevented these groups from dictating, controlling, and manipulating prices in a particular market.

• Section 1 outlaws "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations". This prohibition applies not only to formal cartels but also to any agreement to fix prices, limit industrial output, share markets, or exclude competition.

  “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.”

• Section 2 prohibits "monopolizing, or attempting to monopolize, or combining or conspiring with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations"

“Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.”

For “monopolization,” plaintiffs have to prove that the defendant

1. Possessed market power;
2. Willfully acquired or maintained this monopoly power as distinguished from acquisition through a superior product, business acumen, or historical accident.

Therefore, contrary to popular belief, for monopolization to be illegal under U.S. antitrust law, it is not sufficient for a company to “monopolize” a market in the sense of possessing a very large market share, even a market share of 100%.

To prove “attempting to monopolize” (under Sherman Act 2), plaintiffs have to prove that the defendant

1. Engaged in predatory or anti-competitive conduct
2. with specific intent to monopolize
3. and that there was a “dangerous probability” that the defendant would succeed in achieving monopoly power.

These two provisions, which constitute the heart of the Sherman Act, are enforceable by the U.S. Department of Justice through litigation in the federal courts. Firms found in violation of the act can be ordered dissolved by the courts, and injunctions to prohibit illegal practices can be issued.

Meta Case

Timeline: https://www.economicliberties.us/ftc-v-facebook/

• Filing Date: The lawsuit was filed on December 8, 2020 (amended August 2021), by the FTC along with 46 states, the District of Columbia, and the territory of Guam.
• Allegations: The FTC alleges that Meta has established a monopoly in the social media market by acquiring potential competitors Instagram (for $1 billion in 2012) and WhatsApp (for $19 billion in 2014). The FTC argues that these acquisitions were part of a systematic strategy to eliminate threats to Meta's monopoly power, depriving consumers of alternative social media platforms that could have fostered competition.
• Market Definition: The FTC contends that Meta's actions have prevented competition and innovation in the social media space, leading to higher prices and reduced choices for consumers. However, the initial complaint was dismissed in June 2021 for failing to adequately define the relevant market. The FTC was allowed to refile the lawsuit with an amended complaint, which survived Meta's motion to dismiss in January 2022.

Meta faces a similar lawsuit by the FTC, after the same judge who dismissed the state suit allowed the FTC to re-file its complaint in August 2021. “There was no valid claim that Facebook was a monopolist — and that has not changed,” Meta responded, adding that the “FTC’s claims are an effort to rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final.” In December, the FTC asked the judge to move the litigation forward; however, Meta’s lawyers responded that the case is “nowhere near trial.” “After delaying nearly a decade to challenge historical acquisitions that the agency reviewed in 2012 and 2014, the FTC has no basis to claim that this case is now urgent,” Meta’s lawyers responded.

Possible Laws Broken:

1. Section 2 of the Sherman Act: Prohibits monopolization or attempts to monopolize any part of interstate trade or commerce.
2. Section 7 of the Clayton Act: Prohibits mergers and acquisitions where the effect may be substantially to lessen competition or tend to create a monopoly.

Consequences:

1. Divestiture: Meta could be forced to divest Instagram and WhatsApp, reversing the acquisitions.
2. Behavioral Remedies: Meta might face restrictions on future acquisitions and changes to its business practices to promote fair competition.
3. Fines and Penalties: Potential financial penalties could be imposed if Meta is found in violation of antitrust laws.
4. Precedent: This case could set a significant precedent for future antitrust actions against large tech companies.

Past Cases

Microsoft 2000 Case

The Justice Department filed antitrust charges against the software company. The charges came about in response to Microsoft bundling additional programs into its operating system. It meant that for customers who wanted to access a particular Microsoft application, buying the Microsoft Windows operating system was a prerequisite.

During the week following the Court of Appeals defeat of its 1995 consent degree enforcement suit, DOJ filed a major antitrust suit against Microsoft. In this action (DOJ Complaint 98-12320), filed on May 18, 1998, DOJ was joined by the Attorneys General of 20 States and the District of Columbia. This paper focuses on this last and continuing lawsuit against Microsoft. Over the years, Microsoft has integrated in the Windows class of operating systems many functions and features that were originally performed by stand-alone products.11 Moreover, the Court of Appeals in its June 23, 1998 decision affirmed that Microsoft’s practice of bundling IE with Windows was legal under the terms of the 1995 consent decree. To overcome this interpretation of the law, DOJ argued that Microsoft’s bundling of IE with Windows and its attempt to eliminate Netscape as a competitor in the browser market was much more than adding functionality to Windows and marginalizing a series of add-on software manufacturers. DOJ alleged (and the District Court concurred) that Microsoft added browser functionality to Windows and marginalized Netscape because Netscape posed a potential competitive threat to the Windows operating system

In DOJ’s logic, Microsoft gave away IE and integrated it in Windows so that Netscape would not become a platform that would compete with Windows. Thus, DOJ alleged that Microsoft’s free distribution of IE, its bundling with Windows, and all its attempts to win the browser wars were defensive moves by Microsoft to protect its Windows monopoly.

Verdict:

Microsoft lost the case against the government, and the presiding judge, Thomas Penfield Jackson, ruled that the company violated multiple sections of the Sherman Antitrust Act. However, the trial was not a smooth one. The case was riddled with false and misleading statements, tampering with evidence, such as executive emails, and a plethora of courtroom distractions.

Microsoft was formally charged with constituting a market monopoly by making it difficult for users to install competing software and simultaneously making it difficult to uninstall the company’s browser, Internet Explorer.

On June 7, 2000, after an extremely short hearing, Judge Jackson issued his remedies decision, splitting Microsoft into two companies, and imposing severe business conduct restrictions. The plaintiffs remedies proposal as adopted by the Judge imposed a breakup of Microsoft into two pieces, an “operating systems” company which would inherit all the operating systems software, and an “applications” company with all the with all the remaining software assets. Cash and securities holdings of other companies held by Microsoft would be split between the resulting entities. Bill Gates and other officers / shareholders of the company would not be allowed to hold executive and ownership positions in both of the resulting companies.

Court of Appeals Decision

Microsoft appealed, and was granted a stay of all parts of the District Court decisions until the appeal is heard

The Washington DC Court of Appeals ruled on June 28, 2001 on the appeal by Microsoft of the District Court’s decision in the Microsoft antitrust case. The basic points of the Appeals Court decision are:

1. Microsoft’s breakup and other remedies imposed by the District Court are vacated.
2. Microsoft is found liable of monopolization of the operating systems market for PCs. 20
3. Microsoft is found not liable of bundling of Internet Explorer with Windows.
4. Microsoft is found not liable of attempting to monopolize the Internet browser market.
5. The district court judge Thomas Penfield Jackson is taken out of the case for improper behavior.
6. The case is remanded to the District Court for remedies determination for the monopolization charge.
7. The Appeals Court instructs the District Court to examine the bundling of IE and Windows (if plaintiffs bring it up) under “a rule of reason” where the consumer benefits of bundling are balanced against the damage of anti-competitive actions/

Final Settlement

On November 2, 2001, the United States and Microsoft proposed a settlement in the major antitrust case

A. Provisions seen as favorable to Microsoft:

1. No breakup. There are no structural changes, such as a breakup of Microsoft.
2. Microsoft can expand the functions of Windows. Microsoft can add any functions it wants to the operating system. 3
3. No restrictions on bundling. There are no general restrictions imposed on product bundling by Microsoft.
4. No wide disclosure of source code. Mandated disclosures are limited to interfaces.

B. Provisions seen as favorable to the plaintiffs:

1. Broad scope of definition of “middleware” products: The settlement defines “middleware” to include browser, e-mail clients, media players, instant messaging software, and future new middleware developments.
2. Requirement to partially disclose middleware interfaces: Microsoft will be required to provide software developers with the interfaces used by Microsoft’s middleware to interoperate with the operating system.
3. Requirement to partially disclose server protocols: The settlement imposes interoperability between Windows and non-Microsoft servers of the same level as between Windows and Microsoft servers.
4. Freedom to install middleware software: Computer manufacturers and consumers will be free to substitute competing middleware software on Microsoft’s operating system.
5. Ban on retaliation: Microsoft will be prohibited from retaliating against computer manufacturers or software developers for supporting or developing certain competing software.
6. Uniform pricing of Windows for same volume sale: Microsoft will be required to license its operating system to key computer manufacturers on uniform terms for five years. Microsoft will be allowed to provide quantity discounts.
7. Ban on exclusive agreements;contract restrictions: Microsoft will be prohibited from entering into agreements requiring the exclusive support or development of certain Microsoft software
8. Compliance and enforcement: A panel of three independent, on-site, full-time computer experts will help enforce the settlement. One panel member will be selected by Microsoft, one by the Justice Department, and one by both. The panel will have full access to all of Microsoft’s books, records, systems, and personnel, including source code, and will help resolve disputes about Microsoft’s compliance with the disclosure provisions of the settlement.

Scholars or Experts Assestment

UCLAAnderson Antitrhust Conference with Legal Experts (Nov 2023)

• US antitrust agencies lack the ability to set prospective rules of the road, while in the rest of the world, there is more opportunity to limit certain behaviors (13:30)
• The DOJ and FTC cannot stop a merger or break up a monopoly; they can only ask a federal judge to do that. This is different from other parts of the world (e.g., the EU), In the US the idea needs to be sold to the judge to decide, and they cannot do it themselves (16:30).
• Proposals to give the FTC more power to set rules have all failed in Congress in recent years. In the US, antitrust enforcement requires litigation, taking about 5-6 years for these cases to be resolved (30:00)
• These companies got big by their own merits, and that's okay. However, the problem has been the behavior of these companies regarding acquisitions to eliminate any threat of competition (25:30).
• The DOJ and FTC are trying to hire a lot of trial lawyers to solidify their cases against the judges (22:30).
• Cases involve very detailed factual analysis; opinions on the matter don't matter much. While the technical and economic case matters a lot, what matters the most is the communication and emails that show the intention or objective (43:00).
• For the last 40 years, there has been a more conservative view on antitrust law, but this has started to change recently with people like Lena Khan (50:30).
• The Microsoft case proved that the enforcement of the law does not kill innovation but instead allowed for more entrants later on (53:30)
• Changing the conservative view on antitrust in the US will be an incremental fight. The current FTC leader is moving in the right direction by updating some policy guidelines and bringing some cases, though they will still win some and lose some (56:30).
• While Congress could change the law to deal with these companies, this route is probably hopeless. So, the route currently remains the same as they took with Microsoft back then, but it is a very difficult fight to make and win since the due diligence needed is challenging for DOJ and FTC (they need good economics, good documents, good witnesses, good lawyering, etc) (56:00)

Why the FTC Is Losing Against Big Tech: WSJ

• The FTC is currently as aggressive as it has ever been on antitrust under Chair Lina Khan.
• Khan acknowledges that the agency is outgunned in resources by the biggest tech companies.
• Frequent losses in antitrust cases could set a bad precedent, leading some lawyers to suggest the FTC should be more selective in the cases it brings forward.
• Lina Khan is under investigation for her leadership style at the FTC, indicating internal disagreement with her approach.

American Antitrust Law: Where Are We, and Where Are We Going? (Antitrust Conference, Oct 2022)

• The US operates under a law enforcement regime, not a regulatory one. Agencies are attempting to rewrite guidelines, hoping this will magically change the law and be immediately embraced by the courts. However, the challenge is that courts have long embraced the existing guidelines through an iterative process of case law development. It is unlikely that new policy guidelines will lead to overnight changes in legal processes or laws (18:30)
• The problem with antitrust cases is that the law has become extremely demanding, with very high expectations of economic precision and evidence, making it difficult to win even relatively straightforward cases (24:00).
• Agency staffing has not kept pace with inflation, and headcounts are significantly lower than they were 20 years ago (26:00).
• Change is difficult, and ramping up enforcement is much harder than ramping down. Lina Khan’s efforts are still in the very early stages and the changes proposed are disruptive for clients and practicing lawyers (50:30).
• It is challenging to imagine we are at an inflection point for antitrust legislation change. Current criticisms of existing laws are still in their early stages. Compared to the 1970s, when similar changes were applied, the path ahead is much harder due to eg. how deeply ingrained the existing guidelines are in court decisions, or resistance to giving additional administration power. (1:00:00).
• Current legislative proposals have not been fully studied, raising concerns about the spillover effects of passing legislation primarily aimed at tech companies. These proposals also seem poorly vetted(1:10:00).
• The FTC's case against Meta does not appear to be serious. There will be significant resistance to challenging mergers from years ago, and it seems the FTC goal would be that if it loses the case to demonstrate to Congress the need for new laws or to revisit long-settled mergers (1:33:00).

New Bills Proposals

Competition and Antitrust Law Enforcement Reform Act

Reintroduced on 05/09/2024

Sponsors

Amy Klobuchar (D)*,  Richard Blumenthal (D),  Cory Booker (D),  Martin Heinrich (D),  Mazie Hirono (D),  Ed Markey (D),  Brian Schatz (D),  Tina Smith (D),  Mark Warner (D),  Peter Welch (D),  Sheldon Whitehouse (D),  Ron Wyden (D),

Here are the key changes it proposes:

1. Increase Enforcement Resources:

• Budget Increases: Authorizes significant budget increases for the DOJ’s Antitrust Division and the FTC to ensure they have adequate resources to address the growing number of merger filings and complex antitrust cases​

2. Strengthen Prohibitions Against Anticompetitive Mergers:

• Update Legal Standard for Mergers: Changes the standard from "substantially lessen competition" to "create an appreciable risk of materially lessening competition" where "materially" means more than a de minimus amount. This lower threshold makes it easier to block mergers that could harm competition​
• Burden of Proof Shift: For certain high-risk mergers, the burden of proof shifts to the merging companies to show that their merger will not harm competition. This includes mergers that significantly increase market concentration, acquisitions of competitors by dominant firms, and mega-mergers valued over $5 billion​

3. Prevent Harmful Dominant Firm Conduct:

• Exclusionary Conduct: Introduces a new provision under the Clayton Act to prohibit exclusionary conduct (behavior that materially disadvantages competitors) that presents an appreciable risk of harming competition​
• Algorithmic Collusion: Addresses price-fixing facilitated by algorithms by presuming price-fixing agreements when direct competitors share competitively sensitive information through pricing algorithms​ .

4. Enhance Market Studies and Merger Retrospectives:

• Independent FTC Division: Establishes a new division within the FTC to conduct market studies and merger retrospectives to understand the impact of past mergers and inform future enforcement actions​

5. Additional Reforms:

• Civil Fines: Allows the imposition of civil fines for antitrust violations to deter anti-competitive behavior.
• Whistleblower Protections: Strengthens protections for whistleblowers who report antitrust violations.
• Forced Arbitration: Prohibits forced arbitration in class action lawsuits, allowing plaintiffs more opportunity to pursue legal action in court​

6. Modernizing Antitrust Enforcement:

• Sector-Specific Focus: Recognizes the unique challenges posed by digital markets and proposes adjustments to better handle antitrust issues in the tech industry.
• Dynamic Interpretation of Laws: Encourages a more dynamic interpretation of existing antitrust laws to keep pace with evolving business practices and technological advancements​
  

American Innovation and Choice Online Act

The American Innovation and Choice Online Act aimed to curb anti-competitive practices by major online platforms. It had bi partisan support and it still failed to even reached congress.

The American Innovation and Choice Online Act (“AICOA”)(S.2992 / H.R.3816) failed to pass because of serious privacy, security, and content moderation problems that were identified early on but never adequately addressed by sponsors and supporters. The collapse of AICOA illuminates the fundamental problem with current antitrust efforts in Congress. For decades courts and antitrust agencies have put consumers first in their evaluation of competition in the economy. This attention to the consumer welfare standard has led to tremendous benefits for innovation and the broader economy. Current lawmakers are instead obsessed with the size or conduct of specific companies and how to exert pressure on them or break them up. It is time for Congress to return to basic economics and promote antitrust efforts from a grounded, evidence-driven perspective or the failures of this legislative approach will be repeated in the new Congress.

Sponsors

Amy Klobuchar (D)*,  Richard Blumenthal (D),  Cory Booker (D),  Steve Daines (R),  Dick Durbin (D),  Lindsey Graham (R),  Chuck Grassley (R),  Josh Hawley (R),  Mazie Hirono (D),  John Neely Kennedy (R),  Cynthia Lummis (R),  Jack Reed (D),  Mark Warner (D),  Sheldon Whitehouse (D)

Here are the key changes it proposes:

1. Prohibit Self-Preferencing: Large platforms cannot unfairly prioritize their own products and services over those of competitors.
2. Ensure Fair Access: Requires platforms to provide fair access to their services, preventing them from blocking or disadvantaging competitors' products.
3. Transparency Requirements: Platforms must be transparent about their algorithms and data usage practices.
4. Strengthen Enforcement: Enhances the ability of the FTC and DOJ to enforce these rules with increased authority and resources