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Precautionary Antitrust: The Changing Nature of Competition Law

September 19, 2022

Introduction

An underlying craze over the last few years surfaced abruptly. In a matter of months, the United States techlash has come to the fore with great vigor. On October 6th of 2020, David Cicilline (D-RI), chairman of the House Judiciary antitrust subcommittee, issued a 450-page report aiming at big tech companies vilipending their market power and calling for corporate breakups. A few days later, on the 20th of October 2020, the Department of Justice (DoJ) launched a lawsuit against Google for allegedly violating antitrust laws, which appears to be the most crucial antitrust lawsuit in a generation since the Microsoft case in 2000. In December 2020, the Federal Trade Commission sued Facebook. Since then, several antitrust bills have been introduced, and key political appointments have revealed a dramatic shift in antitrust policy toward a more aggressive enforcement, especially regarding markets characterized by innovation and disruptions. More critically, the new Federal Trade Commission has announced rulemaking activity on unfair methods of competition, thereby signaling a shift from ex -post judicial enforcement toward ex-ante rules of competition. Such a shift illustrates a precautionary approach to competition matters.

The sudden antitrust activism in the United States follows an aggressive stance in the European Union. Europeans have pioneered the techlash with numerous lawsuits. Announced in December 2020, the E.U. will soon adopt the Digital Markets Act (DMA). This new regulation inherently endorses the precautionary logic: With the reversed burden of proof and a shift from ex-post to ex-ante rules of competition aimed at prohibiting potentially pro-innovation conduct, the DMA prioritizes regulation over innovation. In other words, it ensures precaution on disruption, hence inhibiting innovation incentives and capabilities at the expense of consumers and progress and the benefit of more incremental competition and of the preservation of an idealized market structure.

As we discuss and evidence in this article, the underlying logic for this transatlantic approach for a more aggressive antitrust enforcement and reforms signals a precautionary approach to competition: the risk-averse precautionary principle takes hold on antitrust enforcement. Indeed, the precautionary principle is core to Europe's regulatory philosophy. When regulating innovative companies, Europe has adopted a precautionary approach toward disruptions in the name of competition. One example among many others: the creation of new markets through disruptive innovations is systematically labeled as "market tipping," although such "tipping" is the very motive for innovating and creating niche markets by entrepreneurs. A veil of fears prevents entrepreneurs from disrupting markets due to the regulators' preference toward incremental changes, if not the status quo.

Precautionary antitrust as a paradigmatic change of antitrust has Europe as its birthplace. But, given the Brussels' effect and the attraction that European regulations generate, especially for the so-called "Neo-Brandeisians," European precautionary antitrust has now enabled American precautionary antitrust to emerge autonomously. While European precautionary antitrust has mainly materialized in Europe with a shift from ex-post to ex-ante rules of competition with the Digital Markets Act, American precautionary antitrust has mainly materialized through some antitrust bills, but most importantly through the use of Section 5 of the Federal Trade Commission Act which may be weaponized to adopt ex-ante rules of competition. With the precautionary approach to antitrust, the relationship between antitrust and innovation is dramatically changed. Traditionally, innovation is antitrust's problem: while antitrust laws aim at fostering both the competitiveness and the innovativeness of our economies, the enforcement of antitrust laws regularly clashes with innovation processes and their inherently fragile and hardly decipherable environments. More competition may not automatically bring about more innovation since some profitability levels must recoup the necessary innovative investments. After outlining the enduring tension between innovation and antitrust, (I) we shall outline the prevalent framework's pitfalls and the need for an alternative explanatory framework (II). Thus, we shall sketch out the fundamental premises upon which our Precautionary Antitrust explanatory hypothesis rests upon (III) before concluding (IV).

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