Interoperability

Discussions of interoperability relate closely to (i) competitive analysis of a business model and (ii) the question of appropriate remedies.

One sometimes hears a complaint that a consumer cannot lift a data set from one service and install it into another.  For example, an app from the web cannot be downloaded and installed onto an iPhone.  An Amazon book is not readable on an iPhone, nor an Apple book on a Kindle.  A data set from Face Book cannot be downloaded and put onto another website, and Google keeps to itself and monetizes data gleaned from its customers. 

Companies may view data as assets they have created, assembled and maintain, and thus as attributes of the functionality they provide.  (I have argued in a prior blog piece that the uses of data should be explicitly and prominently disclosed to customers so that they know exactly what they pay for a purportedly free service.)  Having built the data sets themselves, or bought them from others, companies are not inclined to give them away for free.  In many cases there are also payment security and privacy controls to maintain.  Those who advocate easy transport of data need to explain how they would maintain security and privacy, and how they would maintain the incentive for innovators to create new systems, services and business models.

Where remedies are contemplated in antitrust cases, they should take care not to (a) impair security or privacy protections, (b) dampen the incentive for companies to maintain in peak form the very assets at issue, or (c) reduce the incentives for innovators to develop new systems and businesses. 

Under U.S. antitrust law, as articulated by the Supreme Court in Alcoa, Grinnell, and Trinko, even a company that has monopoly power generally has no affirmative duty to deal with others or to assist its competitors.  A rare exception to this principle exists under Aspen Ski where one company has come to rely on the services of a competitor and those services are withdrawn for no rational  business reason, i.e., the only discernible reason was to harm the relying competitor and put it out of business.  Of course, other exceptions exist where created by industry specific statute or regulation, for example, state public utility commissions.

Generally speaking, under U.S. antitrust law a company is free to invent, invest in its people, equipment, services and reputation, then reap the financial benefits of what it has created. This is the fundamental incentive system that drives innovation and growth in our capitalist economy.  It fosters innovation by ensuring innovators the fruits of what they create.  A company, having succeeded, does not then become a public utility available to all.  Companies can enjoy the benefits of what they create and maintain in good working order, and are not required to support those who after the invention succeeds, wish to free ride on the inventor's success.

This broad principle assumes that a company’s market position has been achieved on the merits or its products, services, business acumen, or by historical accident, not by tying, exclusionary dealing agreements, predatory pricing, fraud, theft, or unlawful acquisitions of actual or potential competitors.

In fact, there is a massive amount of pro-competitive interoperating among tech services available to businesses and consumers.  A click through on a search engine takes the consumer to vast numbers of websites, which in turn contain their own apps, services, and product offerings.  Amazon provides global reach to third party sellers.  For example, a small store in my hometown in Vermont now has a global customer base.  A woman operating out of her home attends trade shows virtually and in person worldwide. Web services provided by Amazon, Microsoft, or Google enable companies to rent cloud computer services without having to build out their own hardware and software systems; this is a vast lowering of entry barriers and gain in efficiency. Internet advertising directs consumers to services based on data that show the consumer's demonstrated preferences, saving the consumer from sifting through irrelevant material.

There are several good faith business reasons why a company might wish to control use of a facility which it has created.  For example, having utilized company assets to create a service or product, it has a duty to its shareholders, investors, employees, communities, local charities, and other stakeholders to reap for them the benefits of their investment. Second, there might be issues of technical compatibility; interface with another facility cannot be allowed to impair functionality.  Third, a company has an interest in establishing quality standards for content posted on its facility. Controls that prevent unlawful, fraudulent, or scurrilous material or the import of malware onto a site are legitimate.

To summarize, tech companies often lower entry barriers and provide increase geographic reach for both consumers and sellers.  Where a firm has invested in and developed a service, it should be able to realize the value of its investment for its stakeholders. Antitrust law should adhere to its purposes:  Have parties made an agreement that fixes prices or allocates customers between them?  Have they achieved their market  position by tying, unlawful acquisition, exclusive dealing, predation, or other unlawful conduct?  If so, then tailor the remedy to the anticompetitive conduct, but make it no broader.  Eliminate the tying or exclusive dealing, divest the unlawful acquisitions, remove the predation, or stop the appropriation of information and data that they are not entitled to use.

But beware of remedies that would turn the fruits of innovation into quasi-public goods with free access to all.  Such a remedy would risk deterring the incentive for the next great inventor to create something new, could reduce the incentive for a company to maintain the quality and functionality of its assets, and risk security and privacy breaches.