Introduction
Technology has become central to life in the 21st century, and as it continues to develop and grow, so do the companies that manufacture and distribute it. This has led to antitrust efforts, or efforts to reduce monopolies and unfair competition, among technology companies. Big Tech antitrust law revolves around addressing the influence these companies have on the digital economy and examining whether their dominance has a negative impact on market competition.
Background
Recently, the federal government has brought antitrust cases against companies like Google, Meta, and Apple. States such as California have begun to look into tech antitrust, with organizations like the California Law Revision Commission (CLRC) beginning to discuss amending the Cartwright Act in order to give the state more enforcement power. The Cartwright Act is an antitrust law that was designed to foster healthy competition in the marketplace by going after practices such as price-fixing by conglomerates of businesses.
The CLRC’s main recommendations for preserving healthy competition in the tech industry are:
- Revising California’s antitrust laws to have a single-firm conduct provision
- Adopting an “Abuse of Dominance” standard, which bans major companies from using their dominance to gain a competitive advantage even without directly harming consumers
- Adopting laws for merger approval and pre-merger notification
Monopolies as an Antitrust Issue
The issue of monopolies is one of the largest controversies surrounding Big Tech. One example of antitrust action was the Federal Trade Commission’s (FTC) lawsuit against Meta in 2020 which accused the company of creating a social media monopoly by buying additional platforms such as Instagram. There have been similar complaints levied against companies such as Google and Apple as they have expanded. In 2023, California joined the Department of Justice in suing Google due to claims that the company was engaged in monopolistic behavior, as certain advertisements had been shown primarily in the company’s search engine. California has also passed laws such as the Unfair Practices Act in an attempt to prohibit monopolistic actions such as price discrimination, where customers are charged different prices for the same services or goods.
Addressing Monopolies through the Cartwright Act
The Cartwright Act bans practices that create and maintain monopolies, including those that are done to eliminate competition. One such practice is group boycotting, in which competitors agree to boycott a certain “entity”. While the Cartwright Act is in place, changes that have been proposed are meant to modernize the state’s antitrust laws to combat challenges by paying close attention to artificial intelligence and market consolidation. Writers such as Susannah Torpey, Brandon Annette, and Quintana Communings have noted that while the Cartwright Act seems to prohibit any explicit limitations on trade or commerce, more can be done to strengthen antitrust regulations by lowering the threshold needed to find mergers unlawful.
Pros of Amending the Cartwright Act
One of the main arguments made in favor of the changes in the Cartwright Act is that the proposed changes include increased mandates against mergers and acquisitions. Mergers and acquisitions are a way to create monopolies, as they allow companies that have merged or acquired others to drive down prices until competitors are unable to survive. The changes would go after smaller mergers that could impact local commerce in sectors such as retail. They would prohibit single firm conduct, or actions that dominant companies use to preserve monopolies or unfair market advantages.
The changes would also mean increased punishments for those who break the law. Criminal penalties would increase from a $1 million fine to a $100 million fine for corporations, which would incentivize them to work within the bounds of the law. Some have mentioned how the proposed changes would include an “Abuse of Dominance” standard that would make the Cartwright Act more specific in asking companies to provide a higher level of compliance. The “Abuse of Dominance” standard says “dominant entities” are unable to use their position to a competitive advantage, while also easing the burden to prove harm from purported anti-competitive behaviors. The European Union has a similar principle, as it considers a company to be dominant if it controls at least 40 percent of a market’s share.
Cons of Amending the Cartwright Act
Although the proposed changes to the law are meant to prevent certain actions from tech companies, critics of the amendments have mentioned how ambiguities in the law would remain. Words such as “coercion” in the revised law could introduce a concept not seen in antitrust terminology, which may not translate well into cases and investigations. Others have argued that changes in the Cartwright Act may end up conflicting with federal antitrust laws by going against decisions made by the Supreme Court. One such case is Ohio v. American Express where the Supreme Court held that plaintiffs must show how harm was done on both sides of the market on a multi-side market. The proposed amendments to the Cartwright Act would make it so that showing harm to one side is enough to show liability.
Some groups, such as the Information Technology and Innovation Foundation (ITIF), argued against the proposed changes as they could increase costs on companies and taxpayers alike. The ITIF has mentioned how California taxpayers would feel the brunt of the costs as courts would likely face more antitrust suits than they would under federal law. On the side of companies, the recommended changes would increase costs on businesses as there would be a risk of facing investigations and increased enforcement actions. Similarly, increased penalties would deliver greater costs to companies both big and small as those found not to be in compliance would face much higher fines than before.
Conclusion
The proposed amendments to the Cartwright Act represent a change in how California approaches tech antitrust. Supporters view it as a much needed change to hold companies accountable and incentivize them to follow the law. Critics, on the other hand, have argued that the changes would conflict with investigative and judicial norms, and could also lead to increased costs on taxpayers and businesses. As the topic of tech antitrust gains steam, the changes in California’s law may serve as both a model and a reminder that laws continue to evolve alongside technology.