Comments on Conduct in Emerging Technologies

Speaker 7:                         This year, we have a special feature to our programming. Please join me in welcoming Deputy Assistant Attorney General Hetal Doshi, who’s going to share a few remarks with us about conduct in emerging technologies. Welcome.

Hetal Doshi:                      Hello. Good morning. Understanding that I am standing between you and your mid-morning coffee break, I’ll do my best to get through these next 15 minutes so that everyone can get their morning preparation. So, good morning and thank you to the New York State Bar Association and the organizers of this conference for having me here today. It’s a treat to be back in New York as a former New York lawyer, and I’m especially delighted to be with you today to talk about an issue that’s near and dear the emerging technologies [inaudible 01:25:59] enforcement. So, at the risk of going through a little bit of a history lesson before the mid-morning caffeination, I did want to take a little jog back through history to 1890. Now, in 1890, you might recall or not, that Wyoming and Idaho were admitted as the 43rd and 44th states respectfully in the United States. It was also a year in which the now ubiquitous stop sign was first conceived of and described in Rider and Driver Magazine.

Other notable inventions that year included the Ferris wheel as well as the incandescent lamp. As we all also know, the Sherman Act was also promulgated in 1890. This was a law enacted against the backdrop of the historic concentration and power and trust that surpassed competition and had become a matter of public concern. It’s a world not unlike today, but I’m going to get to that in just a moment. But the goal of the Sherman Act in 1890 was, of course, simple but important to prevent restraints of trade of free competition in business and commercial transactions that brought a real public entry. The Sherman Act particularly viewed against the backdrop of the passage of crime, since 1890 to present, is striking in its [inaudible 01:27:10]. Before we get to the modern day though, let’s zoom ahead from 1890, 25 years, approximately 25 years, to 1914 where all of us know the Clayton Act was passed about a month before World War I began. In that time, technology such as barbed wire, mines and machine gun were the latest technological advancements in war.

So, I share this brief history lesson and these facts in this backdrop to observe the obvious. Our world in 2023 was inconceivable in 1890 or 1914. Indeed, the remarkable growth of just the last 20 years alone are akin to the growth conducted during the industrial revolution. We can order anything in any hour from any place without ever having to interact with a human being or leaving our homes. Indeed, I probably could have used a robot or AI to write the speech and probably generated a better outcome. But you’re stuck with my words. Putting aside levity here for a moment, it’s clear the modern economy and the technological innovations that have fueled it generate real questions about how enforcers should treat the modern trust in combinations. How does the complexity of modern and emerging technologies square with the legislative doctrine that was promulgated in the late 1800s and in the early 1900s?

This question has generated an explosion of scholarship that examines antitrust enforcement in our modern internet-based economy. And a good deal of that scholarship, as you may be aware, is premised on the idea of techno optimism, where commentators focus on the differences between high tech products developed today and physical commodities of the days past to reach an outcome that either states, one, that these industries aren’t subject to antitrust doctrine as it exists today, or two, that they shouldn’t be. These scholars posited there’s something so special or distinct about the evolution of technology that makes it inept or impossible to use antitrust laws to examine emerging technology or high technology. And for many, many years, those arguments succeeded. Digital platforms during that time period enjoyed lenient treatment for decades so long that we often call that time period an era of under enforcement. Antitrust enforcers challenged only a handful of emergers in high tech markets during this time and that led to the implicit belief or presumption that antitrust enforcement in digital markets wasn’t really necessary.

That concentration and consolidation was a price that we paid for innovation, and that also meant, that prevailing view at that time also meant, that monopolization law laid dormant [inaudible 01:29:58]. So, that created a self-reinforcing problem. On the one hand, enforcers were wary of taking statutes written over 100 years ago in an entirely different world to tackle anti-competitive conduct implemented by, through or for the benefit of highly novel, sophisticated technology. But on the other hand, there was an overburdened federal judiciary that didn’t often see these kinds of challenges and also, as existed in the zeitgeist at that time, believed that there was something special or distinct about modern emerging technologies that made antitrust doctrine inept for that cause. But I come bearing what I think is good news. Techno optimism, at least in the realm that I’m describing, is speeding away for good reason. We need only to look around to understand why. Courts, enforcers, and scholars alike are reconsidering the assumptions underpinning the special treatment that tech platforms have enjoyed for a long time.

This reassessment is born out of a broader review of antitrust under-enforcement that has prevailed for much of the last four years. So, in speaking to you today about the antitrust law’s applicability to emerging technologies and the division’s view, I want to stress both history but also renewal. The age of our antitrust laws don’t inhibit our ability to contend with emerging markets. They’ve done so ably for over a century. But antitrust enforcement and digital markets will require us to adapt and to expand institutional capabilities, particularly with respect to litigation. We all know that our laws don’t evolve and courts don’t have a chance to weigh in without litigation. So, returning back for a moment to the 1890s, it’s true that the Sherman Act was written to contend with commodity cartels and monopolies involving steel and oil and tobacco and aluminum and coal. Now, while those technologies can seem quaint by contemporary standards, the lost attention grabbing history of the Sherman Act actually started with high technology from that early 20th century era.

For example, the standard oil company was a product of the railroad on the supply side that we all know, but an energy consuming factory on the demand side. The American Tobacco Company was a product of a cigarette rolling machine, which was a novel invention at the time. And the American Can Company was the product of sophisticated mass production systems that made hand soldered cans obsolete. So, much as we’d like to think that our modern world is more complex, harder and special, anyone who’s tried to explain that to their parents knows that it’s really not true. As we, trial lawyers, like to say to juries, there’s nothing new under the sun. And novel technologies are no stranger to antitrust law, nor should they enjoy protection from scrutiny by virtue of their complexity.

So, antitrust law is no stranger in addition to the technology or the technologies in the industries in terms of technology, but it’s also no stranger to the novel and ever evolving anti-competitive conduct that exists in those industries. So, take the Supreme Court’s first encounter of a price fixing scheme involving patent licenses in 1902. In Bement & Sons versus National Harrow Company, 22 firms agreed to charge uniform prices, not to sell competing products, and to defend the validity of the underlying patents. The Supreme Court initially blessed that conduct reasoning that the general rule is absolute freedom in the use or sale of rights under the patent laws, even if the conditions in the contracts keep up the monopoly on fixed prices. But just 10 years later, the Supreme Court realized that it had mistaken novelty for virtue. You might recall, perhaps in your cocktail party conversations, the case of Standard Sanitary or colloquially known as The Bathtub Trust case.

In Standard Sanitary, the court condemned a similar patent licensing scheme, and by doing so, affirmed the Sherman Act’s comprehensive and thorough character that’s demonstrated with its sufficiency to prevent evasions of policy by resort to any disguise or [inaudible 01:34:06] form or to escape its prohibitions by any indirection. Standard Sanitary or The Bathtub Trust case illustrates that the antitrust laws can guard against old vices dressed in new clothes. Take for example on an emerging technology that’s gained attention in antitrust circles, artificial intelligence and machine learning. And the use of those technologies being a tool to engage in anti-competitive conduct. As early as 1944, the antitrust division brought an enforcement action where the defendants were using a jointly owned, computerized online booking system to fix prices. That was in 1994. We now know, in a variety of contexts and across a variety of industries, the defendants who use algorithmic pricing software to fix prices are not shielded from criminal liability simply because they ordered a computer to do what they knew that they could not do on their own.

The public should be assured by the fact that our analysis does not turn on the industry implicated, the complexity of that industry, or whether the defense will be, “Oh no, the robot did it.” Instead, the division, as you might predict, will maintain a focus on competition. The questions we ask is, how is competition affected? By whom? In what ways? So, where does that leave us today? Far from 1890. Competition problems posed by emerging technologies and dominant digital platforms should no longer be viewed as somehow protected from or inept for the application of a century’s work of antitrust laws. To be clear, more tools in the enforcement toolkit will predictably an enforcement, but it’s our job to ask courts to reject the application of special treatment for big tech platforms in favor of applying traditional principles to new technologies. These traditional principles, which we all as lawyers know are precedented, are foundational, durable, and equally applicable today as they were in 1890.

But what about innovation? You might ask. Concentration on first principles adapted to the modern economy with a focus on anti-competitive conduct impacts a market in a way that will engender rather than inhibit technological innovation. We’ve seen it. Monopolization cases like AT&T and Microsoft involve dominant platforms stifling emerging firms that threatened their dominance. But even skeptics of divestitures have praised the breakup of AT&T as the most successful structural remedy in history. Contrary to AT&T’s prediction that the breakup of itself with Bell Labs legacy of innovation, AT&T’s breakup actually fostered innovation while reducing cost. That divestiture encouraged the development of the internet and also, according to one economic study, yielded a net cumulative savings as of 1993 of 115 billion dollars.

So, I’ve shared a little bit about the past and about the mission, but how are we going to get there in terms of fulfilling that mission? It is, of course, reasonable and sensible to acknowledge that some high tech enforcement actions present especially complicated factual patterns for courts as a result of the technically complex products and services offered, but antitrust enforcers are well equipped to meet this need. On the investigatory front, for example, the antitrust division of the Department of Justice has redoubled their efforts in part by hiring, for example, a chief technologist who advises on emerging technologies and proactively studies emerging issues in antitrust law as they affect technology. But that’s the investigation side. After the investigation, if the facts and circumstances weren’t, as you all know, the enforcement action follows. Factual and technical complexity can make the enforcer job as well as the court’s job harder.

Compounding this challenge is the paucity of an antitrust enforcement that has fed and reinforced the problem of diminishing resources at the division over the past several decades in the face of very well funded adversaries. But the division is resolute that the cost of this, the cost of pursuing enforcement should not be a gating factor to action [inaudible 01:38:21]. One example of this is the investment that the division is making in litigation. As the deputy assistant attorney general for antitrust, I’m spearheading the division’s efforts to continue to build and scale its overall trial capabilities, including for high-tech enforcement actions. Central to those efforts is the hiring of experienced sophisticated litigators who are both animated by the mission and also possessed of the background and experience take on the most well financed adversaries that I can imagine.

These litigators hail from a variety of backgrounds, government service, plaintiffs bar, defense bar, their diversity of background and experiences weaves together to put us in the best position to examine our modern economy’s toughest competition problems through myriad lens and perspectives. Indeed, it’s that richness of experience that I just described that will help us shape the story, and perhaps if the star aligns, a story that will be told in a speech 50 years delivered from now about how antitrust enforcers met this particular moment. As a federal prosecutor, I cut my teeth investigating and prosecuting sophisticated financial frauds, corruption, and other crimes involving novel financial instruments and digital assets like cryptocurrency. I know what it feels like to sit alone in an office at 2:00 AM rifling through highly complex documents and puzzling over how I was going to present and explain those materials to a fact finder.

Those formative experiences convinced me that no matter how complex or exotic the technology or how difficult the task, the lawyer’s job, the litigator’s job, is to always find a way to tell a story that resonates with people and lays bare the key issues at stake. I joined the antitrust division because I believe in its mission of protecting the American public and our economy. Increasingly, that mandate will require us to, as it does in this moment, investigate novel and complex products, novel and complex technologies. Remembering that what animated those laws as historic laws in 1890 and 1914 matter just as much today, if not more so. Thank you very much for your time. I really appreciate it.