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The Surprising Consequences of Antitrust Actions Against Big Tech

 |  February 26, 2023

By Riitta Katila & Sruthi Thatchenkery, Harvard Business Review

In 2022, fans of Taylor Swift were upset to discover that the Ticketmaster platform — their only option to buy tickets for the singer’s Eras tour — was ridden with technical difficulties, service delays, and confusing pricing practices, leaving many Swifties disappointed and empty-handed.

Regulators quickly zeroed in on Ticketmaster’s competitive position — the company controls more than 70% of the market for ticketing and live events — as the culprit for the meltdown. “The high fees, site disruptions, and cancellations that customers experienced shows how Ticketmaster’s dominant market position means the company does not face any pressure to continually innovate and improve,” said Amy Klobuchar, chair of the Senate Judiciary subcommittee on competition policy, antitrust, and consumer rights, implying that antitrust action was needed to trigger innovation and thereby reintroduce competition in the ticketing industry.

But does antitrust action actually promote those outcomes?

In a recent Strategic Management Journal article, we discuss our research findings, which conclude that the answer is both yes and no. Our research examines the aftermath of the famed U.S. antitrust case against Microsoft of the late 1990s and early 2000s in the enterprise infrastructure software industry. We show that technical innovation — that is, patenting — does increase following regulatory intervention against a dominant company. However, product innovation — the commercialization of those patents — does not. What’s more, profits decline across the market, with the most technically innovative companies faring the worst.

All in all, our findings suggest that, although antitrust intervention may increase one form of innovation, it does not automatically create meaningful competition and the consumer paradise that regulators imagine. This has implications for complementors (the apps that run on a platform), platforms, and regulators.

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