Aiming at the Wrong Targets: Whether a Tech-Focused Antitrust Prosecution Strategy Will Combat Inequality
October 6, 2022 by Julianna Pasquarello
In recent years, the Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) have seen a staggering 101 percent increase in first requests for merger approvals over pre-pandemic levels. In response, President Biden’s $5.8 trillion 2023 budget proposal requests a staggering increase in the DOJ and FTC’s Antitrust divisions by $88 and $139 million, respectively. These proposals include requests by FTC Chairwoman Khan to reallocate resources towards programs that focus on technology, such as Privacy and Identity Protection and Technology Enforcement. With this hefty price tag, DOJ and FTC leadership must choose their cases wisely.
For some, enforcement is critical to combat “Big Tech” companies that weaponize their “vast wealth, power, and sophistication” to architect a competitive environment that perpetuates inequality. For others, the reallocation of resources toward prosecuting tech companies will cause more harm than good. Analyzing demographic consumer data for two tech companies—Apple and Amazon—that were subject to public scrutiny in 2021, I conclude that prosecutorial discretion with a focus on tech companies that provide consumer goods will do little to combat inequality because upper-middle-class consumers are the primary consumers of these technologies.
Antitrust Enforcement: An Overview
Since the early 1900s, U.S. antitrust law has served as an integral tool to preserve competition. Congress enacted the 1890 Sherman Act, the nation’s oldest antitrust law, to “rein in the trust” of oil and railroad monopolies with unfair business practices. Under the Act, the DOJ could prosecute “every contract, combination or conspiracy” that restrained interstate commerce or promoted monopolization. This prosecution focus reflected a national commitment to protect competition that prioritizes a “consumer welfare standard,” where markets efficiently allocate goods at low prices. Continued critique of corporate law ultimately contributed to later acts, most notably The Clayton Act and FTC Act, to protect consumer welfare.
While enforcement traditionally focused on healthcare, energy, and transportation, the technological revolution of the 1990s created new product markets that challenged antitrust’s scope. Several cases, most notably Eastman Kodak v. Image Technical Services and United States v. Microsoft, brought tech to the legal consciousness, as judges were faced with a new challenge: how to balance the competitive harms of tech intrusion against tech’s potential for digital innovation. Several modern-day cases illustrate the difficult questions raised by these challenges. For instance, how do we balance a company’s incentive to innovate more rapid processing chips with the exclusionary harm suffered by its competitors if that company patents those chips? (FTC v. Qualcomm Inc.) What about if the merger of two firms most capable of developing leading-edge semiconductor tools for high-volume manufacturing would eliminate the competition between those firms? (Applied Materials/Tokyo Electron). For progressive economists, this tech-focused prosecution became necessary to offset how a tech firm’s monopsony conduct can restructure labor and capital markets. Bipartisan federal legislation to curb allegedly predatory tech business practices soon echoed these calls for aggressive tech enforcement, with 56 percent of Americans in support.
Prosecution as a Tool to Combat Inequality
Some economists argue that this antitrust tech enforcement can be used to fight inequality if it focused on industries in which there are more low-income and middle-income consumers. They argue prosecution should combat inequality by “systematically directing resources towards products purchased by middle-and lower-class consumers.” Under this strategy, enforcement officials should devote the scarce resources they have to markets where lower-income consumers internalize the most harm. For instance, the FTC’s 2016 Congressional Budget Justification described its enforcement strategy to focus on anticompetitive harms in markets that cater to “poor and under-served communities,” such as healthcare and supermarket fraud. The strategy also includes a de-emphasis on markets for goods where high-income consumers participate, where past challenges have come under fire for focusing solely on antitrust violations which result in higher prices for goods primarily consumed by the rich.
Currently, a body of critique focuses on prosecutorial discretion in areas where high-income consumers participate—such as opera, stock-brokerage services, and skiing. However, little scholarship analyzes: (1) whether high or low-income individuals participate in the tech market and, in tandem, (2) whether prosecutorial discretion focused on technology companies that provide consumer goods rather than alternative enforcement will better lessen inequality.
Big Tech Market Analysis
Analysis of consumer demographic data of Apple and Amazon reveals a surprising conclusion: tech consumers are overwhelmingly unrepresentative of American society. Policymakers should take this into account when trying to impact inequality through Big Tech prosecution.
Despite Apple’s popularity in American culture, wealthy consumers spend and utilize more Apple products than any other demographic group in the United States. In January 2022, Apple reported new all-time record revenue for its fiscal 2022 first quarter of $123.9 billion. Apple CFO Luca Maestri attributed their success to its loyal customer base, stating “the strong customer response to our recent launch of new products and services.” However, this base consists of the most affluent Americans, who own 4.7 apple products per household, compared to one product per household for the poorest. Differences also exist regarding how much American consumers spend on Apple products, with households with an income level from $35,000 to $50,000 spending the least on Apple products. iPhone users also reported a higher salary than Android customers, with the average annual income of iPhone and Android users at $53,251 and $37,040, respectively. Consequently, the average Apple consumer is financially much more affluent than his or her average American counterpart.
Similarly, an analysis of Amazon spending data reveals that the average Amazon consumer and their preferences are unrepresentative of the US population. Amazon’s average customer is a college-educated woman in the South who earns more than $80,000 per year. Furthermore, she is likely to complete seventy-four orders a year at an annual cost of $2,591. Researchers also note a trend that the more wealthy the individual, the more likely they are to be an “Amazon loyalist.” Two out of three customers with income between $125,000 and $149,999 shop on Amazon most frequently, sixty-six percent of whom reported purchases from the store at least once per week. These high-income consumers also report a greater willingness to pay for Amazon products, with sixteen percent of those earning over $150,000 each year reporting “they’d be okay with spending more than $1,000.” As such, it is no surprise that of those Americans earning over $150,000 per year, sixty percent state Amazon is “their go-to store.”
This consumer demographic data suggests that Apple and Amazon’s customers are unrepresentative of the American population. This income data holds great importance for the future of antitrust protections. If we want to use antitrust prosecution to help fight inequality—as is suggested by the Sherman Act—we should focus our resources on industries that impact lower-income people more.
With a busy period nearing, DOJ and FTC leadership have tough decisions ahead. If their goal is to combat inequality, perhaps they should consider an alternative strategy—one that doesn’t only use their prosecutorial discretion to target tech companies that provide goods. They should instead pursue a strategy that popular with more a representative swath of American society.
 Gidley et al., Shining a light on the massive global surge in merger control filings, WHITE & CASE, (Jan. 10, 2021), https://www.whitecase.com/insight-our-thinking/shining-light-massive-global-surge-merger-control-filings#article-content.
 Rebecca Klar, Biden administration boosts support for antitrust efforts, HILL, (Mar. 29, 2022), https://thehill.com/policy/technology/600270-biden-administration-boosts-support-for-antitrust-efforts/.
 Jessica Rich, Takeaways from the FTC’s 2023 Budget Proposal, JDSUPRA, (Apr. 12, 2022), https://www.jdsupra.com/legalnews/takeaways-from-the-ftc-s-2023-budget-5319188/.
 Maurice E. Stucke & Ariel Ezrachi, Competition Overdose: How Free Market Mythology Transformed Us from Citizen Kings to Market Servants 193 (HarperCollins 2020).
 Press Release, U. S. Dep’t of Just., Antitrust Enforcement and the Consumer (Dec. 15, 2021) (on file with author).
 See Sherman Antitrust Act, 15 U.S. Code § 1 (1890) (“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony…”).
 See Federal Trade Commission Act, 15 U.S. Code § 45 (1914) (“Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.”); see also Clayton Act, 15 U.S. Code § 18 (1914) (“No person engaged in commerce or in any activity affecting commerce shall acquire, directly or indirectly, the whole or any part of the stock or other share capital and no person subject to the jurisdiction of the Federal Trade Commission shall acquire the whole or any part of the assets of another person engaged also in commerce or in any activity affecting commerce, where in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”).
 Laura Phillips Sawyer, US Antitrust Law and Policy in Historical Perspective 22 (Harv. Bus. Sch., Working Paper No. 19-110, 2019), https://www.hbs.edu/faculty/Pages/item.aspx?num=56116.
 FTC v. Qualcomm Inc., 969 F.3d 974 (9th Cir. 2020)
 See Shapiro et al., Antitrust and Innovation: Welcoming and Protecting Disruption 170 (Nat’l Bureau of Econ. Rsch., Working Paper No. 26005, 2019) (summarizing Applied Materials/Tokyo Electroncase case involving two of the largest global providers of tools used to manufacture semiconductor chips).
 Id. at 23.
 Ryan Tracy, Senate Panel Approves Antitrust Bill Restricting Big Tech Platforms, Wall St. J., Jan. 20, 2022, https://www.wsj.com/articles/senate-panel-approves-antitrust-bill-restricting-big-tech-platforms-11642701487; Emily A. Vogels, 56% of Americans support more regulation of major technology companies, Pew Rsch, Jul. 20, 2021, https://www.pewresearch.org/fact-tank/2021/07/20/56-of-americans-support-more-regulation-of-major-technology-companies/.
 Jonathan B. Baker & Steven C. Salop, Antitrust, Competition Policy, and Inequality, 104 Geo. L.J. 1, 18 (2015).
 Fed. Trade Comm’n, Fiscal Year 2016 Congressional Budget Justification (2016), https://www.ftc.gov/system/files/documents/reports/fy-2016-congressional-budget-justification/2016-cbj.pdf.
 See Daniel Crane, Antitrust and Inequality (Feb. 3, 2015) (unpublished manuscript) (on file with author) (“Many of the producers whose commercial arrangements antitrust authorities have challenged in recent decades are not large corporations but professionals such as doctors, dentists, engineers, lawyers, real estate brokers, stock brokers, and small business owners involved in trade associations. While in some cases members of the petty bourgeoisie and professional classes may be wealthier on average than their clients, thus implying regressive effects from antitrust violations, in many cases the effects of the antitrust violations are likely progressive, since the regulated classes would otherwise extract income from clients up the income distribution from themselves.”)
 See Baker, supra note 13, at n.65 (discussing how Daniel Crane alleges Department of Justice allegations of antitrust violations lead to higher prices for products sold primarily to the wealthy in markets such as gem-quality diamonds, stock brokerage services, auctioning of high-end art, luxury automobiles, and skiing).
 Press Release, Apple, Apple Reports First Quarter Results (Jan. 27, 2022) (on file with author).
 Steve Liesman, America loves its Apple. Poll finds that the average household owns more than two Apple products, CNBC, Oct. 10, 2017, https://www.cnbc.com/2017/10/09/the-average-american-household-owns-more-than-two-apple-products.html.
 Hope King, Who is buying Apple products? Old men, CNN, Oct. 29, 2015, https://money.cnn.com/2015/10/29/technology/apple-customers/index.html.
 Robert Williams, Survey: iPhone owners spend more, have higher incomes than Android users, Mktg. Dive, (Oct. 31, 2018), https://www.marketingdive.com/news/survey-iphone-owners-spend-more-have-higher-incomes-than-android-users/541008/.
 Regan McPhee, How Household Income Affects Amazon Consumer Spending, Junglescout, (June 22, 2020), https://www.junglescout.com/blog/amazon-consumer-household-income/.