Some turn to antitrust litigation as regulators fail to rein in Big Tech
By Reed Albergotti, Jay Greene
Washington - When it comes to keeping monopolists in check, the government has played the leading role, from President Teddy Roosevelt battling the railroad at the turn of the century to the Department of Justice taking on Microsoft in the 1990s.
Lately, though, it's been other corporations and, in some cases, individuals standing up to the likes of Apple, Google, Facebook and Amazon, all of which have been accused of wielding monopoly power unfairly.
Last week, Epic Games, the maker of Fortnite, one of the world's most popular video games, became the latest company to step into the ring and fight for increased competition in the app economy. It sued both Apple and Google on the same day after both companies removed the game from their app stores.
Epic's suit follows other civil lawsuits against the companies, all alleging anticompetitive behavior. Apple is being sued in part on antitrust grounds by email company Blix, which accuses the iPhone maker of stealing its technology and then suppressing its app on the Apple App Store. Amazon is facing a price-fixing lawsuit brought by consumers who claim the company has jacked up prices in some cases. And Facebook and Google have both faced lawsuits from independent software developers who claim they have abused their monopoly power over their own digital fiefdoms.
For years, antitrust regulators and lawmakers around the world have weighed whether to take action against big technology companies accused of abusing their power. Most recently, the Department of Justice and state attorneys general have announced investigations into large technology companies.
The House Judiciary Committee's antitrust subcommittee has subpoenaed documents from technology companies relating to allegedly anticompetitive behavior and has been posting them online following a hearing last month featuring the CEOs of Amazon, Apple, Facebook and Google.
With little to show for all the investigations and public hand-wringing, the private industry is moving forward with lawsuits instead.
"Yeah, I wish the DOJ was next to me, but they're not," said Steve Berman, managing partner of the law firm Hagens Berman, which has led separate class-action lawsuits recently against Amazon, Apple and Google for alleged violations of antitrust law. Berman also successfully sued Apple alongside the Department of Justice in the e-books price-fixing case decided seven years ago.
Some see Epic's lawsuit as an important bellwether marking a shift in thinking in corporate America, which has steadfastly lobbied for decades against government involvement in the free market. It's rare for large, multinational companies like Epic Games to find themselves supporting greater enforcement of antitrust laws.
"Something strange started happening a few years ago, and it's continuing today with this suit," wrote Matt Stoller, the director of research at the American Economic Liberties Project, a Washington think tank devoted to reducing the power of monopolies, in his newsletter Wednesday. "Businesses began battling each other, and some started asking for an expansion of public power to structure markets. This suit is the latest on that score, the escalation of an ideological civil war within the business world, an attempt to undo deep changes in our society implemented forty years ago."
At the center of Epic's lawsuit is Apple's 30% fee it charges apps on its platform for all digital goods sold. Apple only allows its iPhone owners to download apps one way: through Apple's App Store. App developers like Epic Games are only permitted to collect money one way: through Apple's payment system. If a person spends $10 on a video game on an iPhone, Apple keeps $3 and the maker of the game gets $7.
Epic flouted those rules last week when it offered Fortnite customers the ability to pay Epic directly, circumventing Apple and offering a lower price, thanks to the removal of Apple as the middleman. About half of Fortnite's customers chose the lower priced option, according to court documents, before Apple removed the app from the store, preventing any new downloads or updates.
Epic promptly sued Apple. Later in the day, Google removed Epic from its App Store for the same reason. Epic sued Google, too. Apple did not respond to requests for comment.
Cases like Epic's won't be easy to win. Some recent antitrust suits against tech giants have already been tossed out of court.
Earlier this month, a federal judge threw out a suit filed against Google in December by Genius Media, which posts song lyrics online. Genius Media saw its web traffic dry up when Google started posting Genius Media's lyrics directly on its search page, giving people little reason to visit Genius's site. Genius argued in court that Google's actions were anticompetitive because Google was using its power as a search engine monopoly to claim Genius's work as its own.
Despite allegedly catching Google red-handed, the judge felt Genius Media had no case because it didn't write the songs and thus didn't actually own the lyrics. Google and a lawyer for Genius media did not respond to a request for comment.
And in January, a group of software developers sued Facebook, alleging that Facebook revoked access to the platform to thwart competition. The companies alleged that Facebook used its market dominance to hobble apps made by rivals in niches where the giant social network wanted to preserve for its own offerings. Facebook said, at the time, the suit lacked merit. And in July, a federal judge largely agreed, dismissing a piece of the case, in part, because the alleged conduct happened too long ago. The judge dismissed the rest of the case as well, but gave the developers the right to amend the complaint to clarify how they were harmed by anti-competitive conduct.
The challenge for private antitrust claims is that judges don't always look favorably on them, says Eleanor Fox, an antitrust law professor at New York University. Unlike cases brought by government agencies, which presumably seek to address consumer harm, judges sometimes view private plaintiffs as whining about their inability to compete, Fox said.
"It's very possible that a judge will be less sympathetic to a private suit," she said.
Epic's lead attorney in the case, Christine Varney, buys the company credibility, legal experts said. Now chair of the antitrust practice at the law firm Cravath, Swayne and Moore, she's known for representing Netscape when it was the focus of the U.S.'s antitrust case against Microsoft in the 1990s. She served as assistant attorney general for the Department of Justice Antitrust Division in the Obama administration and was a federal trade commissioner under President Clinton.
And Epic isn't asking for monetary damages from Apple. Rather, it wants Apple to allow all iPhone customers alternative ways to download applications and all developers choice in how they collect payments.
In the Epic case, Apple could argue that it's done nothing anticompetitive because the requirements Epic and other developers are complaining about were in place long before Apple became so big and powerful, said Randal C. Picker, an antitrust expert and professor at the University of Chicago Law School. In contrast, Microsoft in the 1990s specifically targeted Netscape, attempting to destroy its business. "There's nothing like that here. Apple hasn't changed what it's doing in response to epic," he said.
To be successful, lawsuits brought by private companies don't necessarily have to go all the way to a jury trial. Private lawsuits can also help pave the way for government-led antitrust litigation, legal experts say. Government agencies can step in and piggyback off what private practice attorneys uncover during the discovery process. Attorneys will be scouring massive document dumps for email evidence of big technology executives making anticompetitive moves against smaller companies. If that kind of evidence surfaces, government agencies can use it in enforcement actions.
Evidence gathered in civil antitrust cases has even been used in criminal prosecutions for price fixing and other crimes. The former CEO of Bumble Bee Foods, for example, was sentenced to more than three years in prison for price fixing violations that first surfaced in civil suits years earlier.
It may not be long before the government joins companies like Epic in the fight against Big Tech. While U.S. lawmakers and federal courts have taken a relatively hands-off approach to competition law in recent decades, they've recently shown more interest recently in stepping up enforcement.
The DOJ and state attorneys general are expected to bring a case against Google soon.
Representatives of companies that have been witnesses for government antitrust investigations say they believe the government is preparing to take action against big technology companies. They didn't say when or provide details. They requested anonymity because they are not authorized to speak about the plans.
For now, the action has fallen to private practice attorneys like Berman, who has accused Amazon of price fixing and Google and Apple of using their monopolies over their respective app stores to increase prices, harming consumers and developers alike. Amazon declined to comment on the litigation.
He believes judges will begin to look more sympathetically at cases that take on the big tech companies. "In the last few years they seem to have just grown and taken over every aspect of e-commerce. If I were a judge, I would be much more concerned about the potential dangers here of their size than I would have a few years ago."
The Washington Post