The Right Tool for the Job: The Inherent Risks of Misapplied Remedies
A critical issue for antitrust enforcers to always consider is that of remedies: what is the best course of action to address competitive harms and maintain competition in markets? As I have discussed previously, antitrust enforcement should address specific competitive harms with tailored remedies targeted toward the identified problematic behaviors. Broad, overly aggressive remedies may have significant negative economic impacts for businesses and consumers alike. This is particularly important when enforcers are considering remedies against companies in highly dynamic and competitive markets.
Antitrust remedies typically are either structural, behavioral, or a combination thereof. Behavioral remedies impose restrictions on business practices, such as requiring changes in contract terms or pricing models, and may include additional ongoing oversight and monitoring by competition agencies. In contrast, structural remedies often include the divestment of certain business assets, spinning them off into new companies or forcing their sale to competitors.
Competition agencies need to do more than just prove a violation of antitrust laws in court—they must also propose a way to address the alleged harm. In merger cases, this may result in structural or behavioral commitments. In unilateral conduct cases, crafting appropriate remedies presents a more complex endeavor. Proper remedies in antitrust must balance curtailing harmful business conduct while making sure the proposed cure is not worse than the illness being treated. To avoid the possibility of antitrust enforcers picking winners and losers in markets, competition agencies should only propose targeted fixes that are directly related to proven competitive harms.
When You Only Have a Hammer, Everything Looks Like a Nail
Antitrust enforcers have a broad toolkit to address anticompetitive harms, which is why it is important for them to use the right tool for the job. Under the previous administration, U.S. antitrust agencies generally took a “no remedies” approach, rejecting divestiture proposals by merging parties and limiting the consideration of potentially viable structural remedies. The Federal Trade Commission (FTC) often chose to litigate instead of negotiate remedies, while the Department of Justice (DOJ) viewed divestitures as the exception, not the rule.
Structural remedies can be helpful in reducing the harm of otherwise potentially anticompetitive mergers. Current FTC Chair Andrew Ferguson has signaled the agency’s intent to reverse the prior administration’s policy toward structural remedies. This approach once again empowers antitrust enforcers in their mission to protect competition in the markets, but only if such remedies are applied carefully to address specific competitive harms.
Overreaching Risks Damaging Innovation & Competition
Given that structural remedies usually involve the divestment of business assets or sales to competitors, when applied improperly, the spin-off of several products or services would likely degrade the quality of these services, and the scale and interconnection with other platforms in the ecosystem would leave the services and consumers worse-off than before the divestments. This is a very real risk in the U.S. as the DOJ and FTC pursue structural remedies in a number of the ongoing antitrust cases against leading American digital companies.
Rather than addressing the proven harm, some of the proposed remedies from antitrust enforcers go far beyond the conduct in question, and seem to be targeted at “punishing” the companies, rather than addressing specific competition concerns. These proposals seem to be based on flawed market definitions, attempting to decide which companies compete with each other. Defining a relevant market should be based on empirical evidence, and not determined by the desires of competition enforcers. Moreover, these types of remedies can have broader, unintended consequences that may harm competition and innovation in the wider marketplace, particularly when imposed on companies in dynamic digital markets. In the end they may result in less competition, worse services, and fewer choices for consumers.
Unfortunately, the DOJ and FTC’s remedy proposals in their cases against leading tech companies reflect the flawed notions of why and how digital markets should be regulated, and what enforcement actions are appropriate. The broader implications of these cases will influence how other businesses operate, serving as a warning for businesses to avoid getting too big or successful, otherwise they may incur punitive antitrust enforcement actions. This in turn would potentially reduce investment and innovation across the marketplace, negatively impacting both market actors looking to invest or acquire, and burgeoning innovative businesses seeking investments or acquisition. None of this would encourage a safe and stable environment for businesses to grow and innovate.
Different Tools for Different Jobs
Misapplied structural remedies, especially in complex unilateral conduct cases such as the DOJ’s Google Search case, can create ripple effects impacting the broader market, chilling competition and stifling innovation. It is very difficult for judges and antitrust enforcers to try and predict how highly dynamic markets, such as digital markets, will develop in the future. Applying the right antitrust enforcement tool for the job is essential to minimizing any adverse impact that overregulation can have on competitive markets and innovation.
Antitrust enforcers can also seek behavioral remedies to regulate how companies behave, though these too must be applied carefully. For instance, the DOJ’s proposed mix of behavioral and structural remedies in its Google Search antitrust case, go far beyond the scope of the case. The proposed behavioral remedies include stopping revenue sharing payments, and commitments unrelated to online search such as limiting Google’s investments in AI. Such out-of-scope remedies risk creating distortionary effects in competitive markets, leaving consumers worse-off. As with structural remedies, behavioral remedies should be narrowly tailored to be fit for purpose to address specific competitive harms, thereby minimizing the risks from overregulation.
Looking Forward
Remedies – either structural or behavioral – are a key component of antitrust agencies’ toolkit to enforce antitrust laws and maintain a competitive landscape in the market. However, any agency proposing remedies must first understand what specific conduct the remedy is seeking to correct. If not carefully tailored in response to a clear anticompetitive harm and a specific conduct, remedies – particularly structural ones – risk having unintended consequences that can hinder innovation and ultimately harm consumers. Antitrust enforcement should strive to leave consumers better off and promote competition in markets. If competition policy leaves markets less competitive, something is amiss – like a carpenter using the wrong tool for the job.
