To Rein In Big Tech, Europe Looked Beyond Lawsuits. Will the U.S. Follow?

The DealBook newsletter delves into a single topic or theme every weekend, providing reporting and analysis that offers a better understanding of an important issue in business. If you don’t already receive the daily newsletter, sign up here.

The Biden administration has made reining in big tech companies a priority. Perhaps the strongest signal was the government’s pick for the top antitrust enforcers: Jonathan Kanter, head of the antitrust division at the Justice Department, and Lina Khan, chair of the Federal Trade Commission.

Both are progressives who want to toughen enforcement and stretch antitrust doctrine. Under Ms. Khan, the F.T.C. has aggressively challenged acquisitions — a quick-strike tool in the antitrust arsenal to prevent the tech industry’s giants from getter bigger.

On Thursday, the agency filed suit to block Microsoft’s $69 billion purchase of video game maker Activision Blizzard, which would be the largest technology deal in decades. And on the same day, it deployed a novel argument to stop a relatively tiny acquisition by Meta, arguing in a California court that the $400 million deal by Facebook’s parent company would harm future competition in the emerging market for virtual reality apps.

Stopping a corporate purchase is one thing. But the larger agenda for the Biden administration’s antitrust enforcers involves major cases that accuse Big Tech of being bullying monopolists. Those cases involve long periods of document collection, deposition taking and courtroom wrangling.

For example, the Justice Department has for over a year been investigating whether Google abuses its dominance of online ad technology to stifle competition. No final decision has been made, but if the lawsuit moves ahead in the coming months it could very likely take years for the case to work its way through the courts. The risk is not only that the ad technology at issue may be obsolete, but also that current and would-be rivals will have abandoned or avoided the market.

The stately pace of traditional antitrust action is also evident in the Justice Department’s first salvo against Google. The suit challenging the company’s behavior in the search market was filed two years ago. It is not expected to go to trial for another year, and even then, with appeals that could go all the way to the Supreme Court, the case may not be resolved till 2027 or later, legal experts say.

If the government wins these cases, a court could order breaking up a company or lasting changes in its behavior. But they are costly, high-stakes legal ventures.

There’s another way to ensure giant tech companies do not abuse their market power, say some antitrust experts and lawmakers. The largest American banks are classified as “systemically important financial institutions” by federal regulators and subject to more stringent scrutiny. And the big telecommunications corporations are designated “common carriers” with obligations to allow access to their networks to other companies. A similar approach could work for Big Tech, they say.

Instead of relying only on antitrust laws and the courts, new rules that apply specifically to tech giants could prevent them from unfairly using their market power to steer users to their products and services. For example, such rules could require the companies to offer open and fair access to their platforms, enable data sharing with new entrants and offer data portability to consumers.

In Congress, there has been some momentum for adopting new rules and regulations. “It is past time to update our competition laws for the digital era,” Senator Amy Klobuchar of Minnesota said.

The E.U. and Britain are taking the lead

A bill introduced by Ms. Klobuchar and Senator Charles E. Grassley of Iowa last year singled out four tech companies — Amazon, Apple, Facebook and Google, which is owned by Alphabet — and aimed to ban them from prioritizing their services over competitors. The bill gained bipartisan support and was endorsed by the Justice Department. But the legislation stalled in the Senate, after the companies spent millions lobbying against the law.

Senator Michael Bennet, a Colorado Democrat, introduced legislation to create a Digital Platform Commission — similar to the Securities and Exchange Commission for finance and the Federal Communications Commission for telecom — that would be able to designate “systemically important digital platforms” subject to additional oversight.

In the European Union and Britain, lawmakers have been more successful in passing legislation to limit the power of Big Tech. The European Parliament’s Digital Markets Act went into force last month. It includes a list of rules and obligations that will apply to companies it deems “gatekeepers” and leaves it up to those companies to figure out how to comply. By 2024, if regulators find the steps a company proposes to be insufficient, it could be fined up to 10 percent of its worldwide revenue or even face a breakup order. (Europe’s antitrust officials are also scrutinizing the Microsoft-Activision deal.)

Britain has a different model that gives big tech companies more of a role in determining their commitments. It set up a Digital Markets Unit to oversee a code of conduct, developing rules tailored for each company. Rishi Sunak, the new prime minister, was a supporter of the regulatory concept as chancellor of the Exchequer, and legislation describing the nondiscrimination rules and the enforcement duties of the digital markets unit is expected in the current session of parliament.

The regulatory experiments in the E.U. member states and in Britain could help to inform American policy and court-ordered remedies, said Fiona Scott Morton, an economist at the Yale School of Management.

“We can pick and choose what seems to be working,” said Ms. Scott Morton, who was an antitrust official in the Obama administration.

‘A window for the big tech players’

Mandated data sharing and interoperability, proponents say, could bring more competition and new offerings for consumers. For example, shoppers could take their past purchase history from Amazon and use it to improve their recommendations from another store. Or a new social network, catering to privacy-conscious users, could connect a person to their Facebook friends without giving Facebook their personal information. More generally, proponents say, seamless interconnection to the big digital platforms could be a boon to entrepreneurs building products and services on top of the platforms — and foster more competition among the tech giants.

And the designations of dominant companies could be fluid. “You want a system where, after shifts in the market and technology, companies and services can come off the list,” said Carl Shapiro, an economist at the University of California, Berkeley, and a former senior official in the Justice Department’s antitrust division in the Obama administration.

Even if the government prevails in court against Big Tech, the chances of Google being unseated in search or Amazon becoming an also-ran in e-commerce are slight, said Gene Kimmelman, who was also a senior official in the antitrust division under President Barack Obama. “But you can create more competitive tension in these markets and more openings for mix-and-match technologies.”

Tech companies warn that overly broad regulation can slow innovation, reduce investment and hamper product development, making their products and services harder to use and less useful. They also say there may be unintended consequences if regulators do not carefully weigh trade-offs involving competition, privacy and content moderation. For example, mandated data sharing could undermine privacy if security is less stringent at organizations receiving a person’s information.

In the European Union and Britain, the companies have no choice but to embark on the path of regulation. Better to engage than resist. Even the Digital Markets Act has a provision for “regulatory dialogue,” leaving some room to tweak how the law is carried out.

The potential payoff for big tech companies is that they would have competition rules for the future — a code of conduct that the companies can live with and government regulators worldwide can accept.

Philip Verveer, a Washington lawyer who served in four administrations as an antitrust official and telecommunications regulator, said that more regulation might actually be a relief to big tech companies.

“You can imagine this as a window for the big tech players,” Mr. Verveer said, “an opportunity to settle things, if they choose to.”

What do you think? Let us know:[email protected].