Blog Editors

Recent Posts

Analyzing Tech Regulation: Shapiro's Critique and Policy Recommendations

UPCOMING EVENT: Automated Decision-Making Technology and Artificial Intelligence

Free Speech and Trademark Law Clash in Vidal v. Elster

Using Technical Solutions to Address Issues in Privacy Law: A Talk by Professor Zubair Shafiq

An Introduction to Venture Capital

Archive

Analyzing Tech Regulation: Shapiro's Critique and Policy Recommendations

Posted By Rebecca Tsang, Mar 13, 2024

UPCOMING EVENT: CILS Presents: Evolution of the Merger Guidelines: Is This Fox Too Clever by Half?

Editor’s Note: This post is related to a program hosted by The Center for Innovation, Law, and Society (CILS). Professor Carl Shapiro teaches at the Graduate School at the Haas School of Business and the Department of Economics at the University of California at Berkeley. He has multiple publications in areas of industrial organization, competition policy, patents, the economics of innovation and competitive strategy.

In his paper Regulating Big Tech: Factual Foundations and Policy Goals, UC Berkeley Professor Carl Shapiro analyzes the current regulatory efforts targeting major tech companies and focuses on regulations promoting competition and controlling market power. He critiques Congress, expresses concerns and provides a detailed analysis of the lack of evidence-based decision-making of the House Judiciary Committee's (“HJC”) report on competition in digital markets, particularly focusing on Amazon's business practices. He particularly emphasizes the need for evidence-based policymaking to ensure these efforts are effective.

Shapiro challenges the conclusions drawn in the HJC report, emphasizes the flaws in the analysis, and questions the evidence presented. He believes that certain Amazon business practices, such as its Prime membership program and acquisitions, benefit consumers and should not be viewed negatively.

Regarding Amazon's Prime membership, Shapiro critiques the selective use of evidence and flawed analysis in HJC’s report. The report alleges that Prime is a loss leader for Amazon and engages in below-cost pricing that harms consumers.^[1] However, Shapiro argues that Prime's pricing structure involves an annual fee and lower prices per order, attracts consumers and drives additional purchases at Amazon. He argues that labeling Prime as a loss leader overlooks the additional purchases generated by Prime members, which contribute to Amazon's overall profitability.

Furthermore, Shapiro criticizes the report's reasoning regarding Amazon's Zappos, Pillpack, and Ring acquisitions. For example, Zappos enabled Amazon to increase a significant selection of its fashion-related categories. Yet, the HJC report censures the acquisitions because of these efficiencies, expressing concerns about expanding market power and exerting its dominance in various markets. Shapiro argues that the acquisitions enable Amazon to compete effectively in various markets by lowering their prices and better serving their customers, ultimately furthering the interests of consumers.

Shapiro advocates for specific regulations in the digital market that do not hinder the ability of tech companies to compete. He emphasizes the importance of specific “rules to protect the privacy of end users [that give] people strong and clear control over how the data generated by their online activities is collected, stored, and shared.”^[2] Shapiro suggests rules that require platforms to clarify their policies for business users, prompt responses to queries from business users, and restrictions from penalizing businesses for using rival platforms. Additionally, he recommends regulations that prevent platforms from requiring business users to share confidential information beyond what is necessary.

Current privacy regulations such as Europe’s General Data Protection Regulation (GDPR) and the California Computer Privacy Act (CCPA) echo Shapiro's views on ensuring responsible data collection.^[3] Similar to how Shapiro advocates for specific regulations without obstructing the ability of tech companies to compete, these regulations focus on allowing users to "opt in" on how their data is used, establishing transparency and security.^[4] This aligns with Shapiro's emphasis on protecting the privacy of end users and allowing them control over their data. By promoting responsible data practices, these regulations aim to address concerns related to competition in the digital market without hindering innovation or harming consumer welfare.

[1] Stu Woo, Amazon 'Primes' Pump for Loyalty, Wall St. J. (Nov. 14, 2011),

 https://www.wsj.com/articles/SB10001424052970203503204577036102353359784.

[2] Carl Shapiro, Regulating Big Tech:  Factual Foundations and Policy Goals, (Feb. 15, 2023), https://faculty.haas.berkeley.edu/shapiro/BigTechReg.pdf.

[3] Roger Mcnamee, Big Tech Needs to Be Regulated. Here Are 4 Ways to Curb Disinformation and Protect Our Privacy, Time (July 29, 2020), https://time.com/5872868/big-tech-regulated-here-is-4-ways.

[4] Id.