The Friction Paradox: Intermediaries,Competition,and Efficiency

Abstract

Commentators sometimes say that the elimination of impediments to trade—namely, market friction—tends to expand trade and foster competition. This casual assumption is known to be erroneous. Antitrust law recognizes that restraints of trade—which are forms of market friction—are often pro-competitive and frequently have both pro- and anticompetitive effects. Accordingly, antitrust law prohibits unreasonable restraints of trade, but not all restraints of trade. Trust-busting advocates promote a different approach to market friction. They argue that the antitrust laws intend to maintain fragmented industries and favor small businesses. This approach, which has been embraced by the antitrust agencies in recent years, implies that high-friction markets are more competitive than low-friction markets. It is an expression of a phenomenon that can be called the “ friction paradox ”: the elimination of market friction is desirable until this goal is accomplished. Notable examples of the friction paradox include hostility toward new generations of market intermediaries, such as supermarkets, chain stores, department stores, big-box stores, digital platforms, and digital ecosystems. This article observes that antipathy for large intermediaries results in a willingness to sacrifice the core benefits of competition—low prices, convenience, efficiency, and innovation. It, therefore, argues that antitrust expressions of the friction paradox place competition policy at war with itself.

Keywords

antitrust competition policy intermediaries friction

I. Introduction

As commonly used, the term “market friction” means any impediment to trade, such as impediments caused by transaction costs, imperfect information, uncertainty, business practices, contractual restrictions, and regulation. It has long been assumed that, because the elimination of market friction facilitates trade, it also fosters competition. The common law of restraints of trade, which inspired the enactment of the Sherman Act,¹ reflects this premise. Correspondingly, antitrusts’ core legal standard is a ban on unreasonable restraints of trade.² As Justice Black famously wrote in Northern Pacific Railway (1958),

The Sherman Act was designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade. It rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conductive to the preservation of our democratic political and social institutions. But even were that premise open to question, the policy unequivocally laid down by the Act is competition.³

This article explores the antitrust implications of situations in which the premise regarding the inverse relationship between friction and competition does not hold. Instead, the elimination of friction results in high levels of market concentration and the formation of powerful economic enterprises. The emergence of digital intermediaries in the past three decades has drastically reduced friction throughout the economy while creating “winner-take-most markets,” which are markets that tend to tip toward oligopolies and monopolies.⁴

Digital intermediaries create demand for their services through low-friction business environments and generate revenues from other forms of friction that are less transparent to consumers, such as fees that sellers pay, advertising, and the monetization of personal information. There is nothing novel in this strategic utilization of friction by intermediaries. Market intermediaries typically create demand for their services through the elimination of friction and collect revenues from sources of friction that they preserve.⁵ For example, credit card companies offer low-friction payment systems and generate revenues from fees and interest.⁶ The strategic exploitation of friction gave middlemen a bad name and often warrants regulation.⁷ What separates digital intermediaries from prior generations of intermediaries is their superior capacity to exploit friction profitably. Digital intermediaries typically draw mass pools of consumers to low-friction environments that produce positive network effects, such as online markets and social media networks. Their intermediation services are provided through dynamic data infrastructures whose fixed costs are very high and marginal costs are negligible, and the returns to scale and scope are extreme.

Today, powerful digital intermediaries (“digital gatekeepers”) operate or try to develop digital ecosystems, which are business enterprises that integrate several digital platforms and other lines of business so that each business arm strengthens the others and, together, the arms entrench the market positions of the ecosystem in the relevant economic sectors.⁸ Five companies—Alphabet, Amazon, Apple, Meta, and Microsoft—operate the world’s most powerful digital ecosystems. Their fees have been described as “exorbitant” and their contractual terms have been called “oppressive.”⁹ In the public discourse, lawmakers, senior antitrust officials, and commentators regularly describe digital gatekeepers as Big Tech monopolies that abuse their control over access to markets by picking winners and losers throughout the economy, tilting the playing field in their favor, discriminating among third parties, expanding into new markets, stifling innovation, entrenching their monopolies, and exploiting their power in other ways.¹⁰

This article identifies the friction paradox: the elimination of market friction is desirable until this goal is accomplished. This article observes that the desire to cut out the middleman tends to lead to the rise of powerful intermediaries. This happens because efficient consolidation of intermediation services creates economies of scale and scope. Similarly, vertical integration of intermediaries with upstream or downstream firms reduces friction along the supply chain. For example, traditional mom-and-pop retailers were replaced by chain stores and department stores, many of which were replaced by big-box stores, which have been gradually replaced by online retailers. Along the way, retailers have developed private labels, delivery services, and other vertical arrangements that have further enhanced efficiencies. This Schumpeterian gale of creative destruction has reduced friction in the economy, devastated less-efficient intermediaries, and led to the rise of powerful intermediaries that have the power to squeeze suppliers and other parties.¹¹

Contemporary trustbusting advocates, this article argues, ignore the tensions between the social costs of friction and the social costs of market concentration. They seem to believe that the solution to opportunistic intermediation is restrictions on the size and scale of intermediaries. But, as the friction paradox indicates, this approach sacrifices the benefits of low-friction markets. This article questions the wisdom of the willingness to sacrifice low prices, convenience, and efficiency. It argues that the disregard for welfare tradeoffs is shortsighted and impractical.

II. The Indispensable Middleman

Powerful digital gatekeepers are hardly the first generation of middlemen that are depicted as greedy parasites who inflate the costs of trade.¹² This popular belief begs the question of whether the economy is likely to function better without retailers, utility companies, railroads, airlines, lawyers, bankers, and all other intermediaries. While intermediation fees might be exorbitant and intermediation practices might be oppressive, intermediation services are indispensable.

Early restraints of trade laws—the predecessors of modern competition laws—targeted attempts of middlemen to corner markets to exact exorbitant prices for necessities.¹³ For example, from the thirteenth to the sixteenth centuries, the English Parliament enacted a series of statutes criminalizing market intermediation by creating middleman offenses (forestalling, regrating, and engrossing).¹⁴ These laws rested “on the theory that middlemen . . . served no useful purpose,”¹⁵ and “were parasites profiting by the distress of others.”¹⁶ Adam Smith criticized the tendency of lawmakers “to hinder as much as possible any middleman of any kind from coming in between the grower and the consumer.”¹⁷ Recognizing that the middleman offenses “interfered with the freedom of business instead of promoting it,” the English Parliament repealed these offenses in the early nineteenth century.¹⁸ The drafters of the Sherman Act intended to codify the common law of restraints of trade and consciously chose not to create middlemen offenses.¹⁹ It is, therefore, well understood that the functioning of markets heavily depends on the existence of middlemen. The important question is how lawmakers and government agencies can mitigate the costs of opportunistic intermediation.²⁰ The condemnation of size and efficiencies, this article observes, will come at a high cost.

Taken literally, the desire to cut out the middleman could be misleading. Entrepreneurial efforts to cut out middlemen typically lead to vertical arrangements between intermediaries and upstream or downstream companies or the replacement of established intermediaries with new ones.

III. Friction Tradeoffs

Intermediaries ordinarily use business models that simultaneously eliminate some forms of friction and maintain other forms of friction. The elimination of friction creates demand for intermediation services, whereas the preservation of friction allows intermediaries to generate revenues.

To illustrate the strategic exploitation of friction by intermediaries, consider Apple’s “walled garden” ecosystem. As described by one court, Apple’s ecosystem is

a closed platform whereby Apple controls and supervises access to any software which accesses the iOS devices (defined as iPhones and iPads . . .). Apple justifies this control primarily in the name of consumer privacy, security, as well as monetization of its intellectual property. Evidence supports the argument that consumers value these attributes. Due in part to this business model, Apple has been enormously successful, and its devices are now ubiquitous.²¹

Figure 1.

Puck (Dec. 13, 1911).

Similarly, The Wall Street Journal personal technology columnist, Joanna Stern, explained that “Apple’s [walled] garden consists of three areas: hardware, software and services. Whatever Apple devices you’ve got, they all just work in ‘magical’ harmony. But this magic doesn’t work with Android phones or Windows computers.”²² Stern identified three features that draw consumers to Apple’s walled garden and keep them in: (1) “Everything plays well together,” (2) “Everything keeps improving,” and (3) “Privacy and security are top priority.”²³ In the same spirit, a New York Times columnist noted that “Apple sometimes uses its market power in ways that are inarguably good for its customers. [For example, Apple’s Transparency Tracking App is] a phenomenal privacy feature that Apple added to iPhones and iPads.”²⁴ The seamless integration of hardware, software, and services lures consumers to a seemingly frictionless environment, but the ecosystem’s walls create friction that compromises competition between Apple products and non-Apple products.

Restrictions on in-app purchases are one of the most controversial features of Apple’s walled garden. Alphabet uses similar restrictions. App developers have argued that restrictions on in-app purchases are a form of friction that allows app stores to “collect excessive commissions from software developers on users’ digital purchases and stifle competition by giving unfair advantages to their own products and services.”²⁵ Apple and Alphabet have defended the restrictions, arguing that they serve consumers through security, privacy protection, and control over spending.²⁶ Financial analysts have observed that decentralization of app purchases “would require consumers to manage disparate accounts across many developers” and might create “more friction than the current App Store model.”²⁷ Epic Games, a leading videogame production company, has argued that restrictions on in-app purchases violate the antitrust laws.²⁸ In December 2022, Epic Games agreed to pay over half a billion dollars to settle FTC actions against alleged violations of “kids’ privacy” and “dark patterns designed to rack up charges without consumers’ express consent.”²⁹ This anecdote illustrates that the strategic use of friction by digital gatekeepers creates both positive and negative welfare effects.

Critics of restrictions on in-app purchases, however, have discounted the benefits of such restrictions.³⁰ A recent report of the U.S. Department of Commerce, Competition in the Mobile Application Ecosystem, argues that

policies that Apple and Google have in place in their own mobile app stores have created unnecessary barriers and costs for app developers, ranging from fees for access to functional restrictions that favor some apps over others. These obstacles impose costs on firms and organizations offering new technology: apps lack features, development and roll-out costs are higher, customer relations are damaged, and many apps fail to reach a large number of users.³¹

Studies of prior generations of powerful intermediaries also demonstrate that intermediaries simultaneously mitigate and create friction. For example, The Slaughter-House Cases involved state legislation that created a slaughterhouse monopoly outside New Orleans whose market position was secured through a ban on slaughtering operations in the city.³² Urban butchers—all small businesses—filed almost 300 lawsuits challenging the constitutionality of the legislation. Out of context, when the benefits were not considered, the challenged slaughterhouse reform was viewed as a corrupt legislative scheme. In actuality, the reform was an elegant solution to New Orleans’s horrific sanitary conditions.³³ The city did not have a sewer system and numerous small urban butchers dumped waste wherever they could. The centralization of slaughtering in an urban area through the grant of an exclusive franchise to a private company was a sanitary reform that New Orleans badly needed.³⁴

The East India Companies, which were among the largest business enterprises in history, also eliminated and created friction. In the seventeenth century, several European monarchs granted exclusive franchises to private enterprises that developed global supply chains. Most notably, such exclusive franchises enabled the formation of the Dutch East India Company, founded in 1602 and dissolved in 1799, and the English East India Company, founded in 1600 and dissolved in 1858.³⁵ The East India Companies bought, produced, and captured resources in Southeast Asia; transferred them to Western economies; and sold them to European merchants. To carry out their global operations, the East India Companies built large fleets of ships, armed forces to protect their supply lines, factories, distribution centers, and vast bureaucracies. They also developed governance systems to mitigate internal agency problems.³⁶ The East India Companies were notorious for their exploitations and corruption. However, many of their organizational methods contributed to the development of capitalism. They pioneered what later became known as the “corporate form” whose characteristics include locked capital, legal personhood, limited liability, separation of ownership and management, corporate governance, tradable shares, and rules intending to reduce agency costs.

International Boxing Club (1959) was a trustbusting case that sought to dissolve a set of arrangements that a pair of entrepreneurial sports magnates—James Norris and Arthur Wirtz—developed.³⁷ In the late nineteenth century and throughout much of the twentieth century, boxing was one of America’s most favorite sports. The development of motion picture technologies considerably contributed to the commercialization of boxing.³⁸ Norris and Wirtz were successful businessmen who partnered to develop sports businesses.³⁹ During the Great Depression, they acquired two of the nation’s most popular arenas: Chicago Stadium and Detroit Olympia Stadium.⁴⁰ Together and independently, they also acquired hockey and basketball teams. In 1946, Norris and Wirtz also acquired control in the St. Louis Arena.⁴¹ In 1949, the very early day of television, Norris and Wirtz founded the International Boxing Club. They negotiated with Joe Louis, then the world’s heavyweight boxing champion, an exclusive promotion agreement. Under the terms of the agreement, Louis, who wished to retire, would fight four leading title contenders. Louis and the four contenders gave Norris and Wirtz exclusive promotion rights including rights to radio, television, and movie revenues.⁴² They used this agreement to acquire control in Madison Square Garden through a deal with the nation’s leading boxing promoter, Mike Jacobs, who also wanted to retire.⁴³ The Garden’s revenues from all events including boxing reached a peak in 1947 and declined steadily since that year.⁴⁴ The trial court explained:

Television was a major factor which accounted for the Garden’s decline in income in the period 1947-1955. The advent of television affected unfavorably the gate receipts at the Garden as, indeed, it has many other forms of public entertainment. The Garden was able to offset this loss in patronage, to some extent, by the sale of television rights.⁴⁵

Through exclusivity agreements with boxing champions, Norris and Wirtz developed a successful boxing enterprise that offered two boxing fights a week that CBS broadcasted. The federal government sought to break up IBC, under the theory that the exclusivity agreements with boxing champions were unreasonable restraints of trade. A federal judge was persuaded and instructed Norris and Wirtz to dissolve the International Boxing Club, dispose of their controlling interest in Madison Square Garden, resign as officers of the Garden corporation, promote no more than two title fights a year for a period of five years, and make the Norris–Wirtz arenas (Chicago Stadium, Detroit Olympia Stadium, and St. Louis Arena) available to independent boxing promoters at reasonable rentals. The Supreme Court upheld. Trustbusting advocates might see in International Boxing Club a blueprint for breakups of powerful intermediaries. Others might recognize that the analysis focused on alleged anticompetitive effects and excessively discounted its efficiency enhancing virtues, which enabled a reliable production of two popular boxing fights a week.

The foregoing examples illustrate the essence of the friction paradox. The elimination of friction is often a desirable goal only until it is accomplished. Large-scale intermediaries are common economic arrangements used to overcome impediments to trade, but they do not form frictionless markets. Their pursuits of profit create powerful incentives to maintain some forms of friction. The methods intermediaries use to generate revenues are perceived as opportunistic and exploitative, and sometimes they are also normatively objectionable.

The present trustbusting impulse is consistent with past technological disruptions that gave rise to new generations of large intermediaries. Notable examples are the anti-chain store movement of the 1920s and 1930s and the anti-big box movement of the 1990s and early 2000s.⁴⁶ The core idea that guided these antitrust movements was that the social costs of bigness vastly exceed the benefits of low prices and convenience offered by large-scale intermediaries. Be it as it may, this vision turned antitrust enforcement into a tool to protect the viability of small businesses at the expense of consumers.

IV. Antitrust Scrutiny of Intermediaries

Numerous antitrust cases involve intermediaries. For example, hub-and-spoke conspiracies typically intend to exclude competition among intermediaries.⁴⁷ In some hub-and-spoke cartels, a powerful intermediary persuades suppliers to raise its rivals’ costs.⁴⁸ In others, suppliers orchestrate collusions among intermediaries.⁴⁹

Eastern States (1914) involved a trade association of intermediaries (lumber dealers) that facilitated a collusion among members to punish upstream intermediaries (wholesalers) who circumvented the association members to deal directly with consumers.⁵⁰ Dr. Miles (1911) involved a manufacturer whose marketing strategy relied on resale price maintenance (“RPM”) and tried to block an entrepreneurial intermediary (wholesaler) who circumvented the manufacturer’s RPM policies.⁵¹ There, Justice Holmes, who considered antitrust law “humbug based on economic ignorance and incompetence,”⁵² dissented, arguing that RPM combats “knaves [who] cut reasonable prices for some ulterior purpose of their own.”⁵³ A long line of cases address vertical restraints on intrabrand competition, namely, manufacturer’s restraints on competition among intermediaries that sell their products.⁵⁴ The Terminal Railroad (1912) and Associated Press (1945) cases involved joint ventures of rivals that established monopolist intermediaries.⁵⁵ In Klor’s (1959), the Supreme Court inferred that parallel compliance of suppliers with demands of a powerful intermediary established a per se unlawful group boycott.⁵⁶ Lorain Journal (1951) condemned a monopolist intermediary (newspaper) that refused to deal with advertisers who worked with an entrepreneurial rival (radio station).⁵⁷ FOGA (1941) involved a trade association of manufacturers that colluded to pressure intermediaries not to deal with rival manufacturers that allegedly misappropriated their original deigns.⁵⁸ Microsoft (2001) concerned exclusionary practices of a digital gatekeeper.⁵⁹ Similarly, PLS.com (2022), Sabre (2019), and Alaska Airlines (1991) also involved alleged anticompetitive practices of digital intermediaries.⁶⁰

Several old antitrust decisions involving intermediaries state that the legislative history of the antitrust statutes reflects a “desire to promote competition through the protection of viable, small, locally owned business.”⁶¹ These decisions further claim that “Congress appreciated that occasional higher costs and prices might result from the maintenance of fragmented industries and markets.”⁶² Courts frequently expressed this view in the three decades that followed World War II. For example, in Alcoa (1945), Judge Learned Hand famously wrote that

[t]hroughout the history of [the antitrust] statutes it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units which can effectively compete with each other.⁶³

A&P (1949) illustrates the intuition that guided this line of cases.⁶⁴ There, the Seventh Circuit upheld the condemnation of a powerful retailer for cutting costs by eliminating upstream intermediaries to deal directly with suppliers and for operating a private-label apparatus. As analyzed by the court, the retailer’s efficiency-enhancing methods were anticompetitive because the retailer’s rivals could not adopt comparable methods. Some threads of contemporary criticism of digital gatekeepers rely on a similar intuition: efficiency gains are anticompetitive when they are not available to all rivals.

Then, there are more recent merger cases involving intermediaries. Staples (1997) and its progeny illustrate a Schumpeterian gale of creative destruction, where technological and managerial innovations establish one generation of powerful intermediaries, which is subsequently replaced by another generation of more powerful and more efficient intermediaries, such as Amazon, Walmart, and Target.⁶⁵ AT&T/Time Warner (2019) was an important—although unsuccessful—antitrust enforcement action.⁶⁶ There, the DOJ tried unsuccessfully to block the acquisition of a media conglomerate by a large cellular company. This deal, however, proved to be a business disaster.⁶⁷ In contrast, the approvals of Facebook’s acquisitions of Instagram and WhatsApp, Google’s acquisition of DoubleClick, and Live Nation’s acquisition of Ticketmaster are examples of excessively lax antitrust enforcement in deals involving powerful intermediaries. Today, the DOJ and FTC invest enforcement resources in actions intending to unwind these deals.⁶⁸ At the same time, the antitrust agencies try to block new acquisitions of powerful digital gatekeepers.

What practical lessons does the history of antitrust scrutiny of intermediaries offer? Some scholars and commentators find in this dimension of antitrust history support for positions advocating to discount anti- or pro-competitive effects. A balanced and practical approach, however, must recognize that successful business models ordinarily generate positive and negative welfare effects. The tendency of ideological advocates to focus on one type of effects and discount the other is unlikely to serve the public.

V. The Rule of Reason

Antitrust analysis typically treats the elimination of friction as pro-competitive effects and the maintenance of friction as anticompetitive effects. Accordingly, intermediation practices are typically evaluated under the rule of reason.⁶⁹ The exception is circumstances where intermediation practices facilitate naked restraints of trade.⁷⁰ Topco (1972) represents a radically different approach. There, a cooperative association of mid-size retailers adopted a variety of restraints on competition among members and an apparatus for private-label products. The Supreme Court refused to assess the arrangements under the rule of reason, writing that “[w]ithout the per se rules, businessmen would be left with little to aid them in predicting [the outcomes of antitrust inquiries]” because the rule of reason “leave[s] courts free to ramble through the wilds of economic theory in order to maintain a flexible approach.”⁷¹

A few years later, the Supreme Court adopted the rule of reason as antitrust’s default review standard, stating that “[u]nder this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.”⁷² The Court further emphasized that “[any] departure from the rule-of-reason standard must be based upon demonstrable economic effect.”⁷³ Contrary to the Court’s prediction in Topco, contemporary applications of the rule of reason are not “rambl[ing] through the wilds of economic theory.” Rather, they rely on the “three-step, burden-shifting framework.”⁷⁴ Under this framework,

the plaintiff has the initial burden to prove that the challenged restraint has a substantial anticompetitive effect that harms consumers in the relevant market . . . . If the plaintiff carries its burden, then the burden shifts to the defendant to show a procompetitive rationale for the restraint . . . . If the defendant makes this showing, then the burden shifts back to the plaintiff to demonstrate that the procompetitive efficiencies could be reasonably achieved through less anticompetitive means.⁷⁵

The problem is that courts apply the three-step, burden-shifting framework while discounting the weight of anticompetitive effects. This discounting is required under the false-positive principle that the Supreme Court embraced in the mid-1980s.⁷⁶ Under this principle, courts assess antitrust questions under the premise that erroneous condemnations of pro-competitive practices are prohibitively costly, while the costs of chronic neglect of anticompetitive practices are tolerable because markets self-correct. Adhering to this premise, in Ohio v. American Express (2018), the Supreme Court ruled that anti-steering clauses of a credit card company “do not unreasonably restrain trade,”⁷⁷ although anti-steering practices intend to eliminate competition among intermediaries. Today, aspiring trustbusters seek to replace the rule of reason with legal standards that heavily discount pro-competitive effects.⁷⁸ As already noted, it should be clear that enforcement philosophy guided by strong presumptions concerning the anti- or pro-competitive nature of markets is unlikely to protect the competitive process effectively.

Contemporary trustbusting advocates go one step further. They depict the antitrust laws as a statutory mandate to filter welfare effects, which allows and possibly even requires antitrust enforcers to combat business methods that arguably generate any type of negative welfare effects. For example, President Biden’s Executive Order 14036, Promoting Competition in the American Economy, suggests that lax antitrust enforcement in recent decades has denied “Americans the benefits of an open economy,” widened “racial, income, and wealth inequality,” and compromised “basic economic liberties, democratic accountability, and the welfare of workers, farmers, small businesses, startups, and consumers.”⁷⁹ Under this approach, the consumer welfare standard, which focuses on prices and output, is a flawed technocratic scheme.⁸⁰ This approach is profoundly erroneous. It would give antitrust enforcers a license to prosecute companies for agreements, transactions, and practices that arguably harm someone for any reason. For example, if every harm is treated as competitive harm, many forms of efficiency would be declared anticompetitive because they might result in layoffs and harm inefficient small businesses, low prices would be prosecuted as anticompetitive predatory strategies, and collusions that allegedly advance good causes would be ignored. Combined with a strong preference for per se illegality standards, this attitude is much more likely to cripple the competitive process than protect market competition.

VI. Digital Ecosystems

As noted at the outset, the formation of winner-take-most markets conflicts with the premise that the elimination of friction tends to foster competition. Some commentators believe that this pattern explains why efficiency, low prices, and convenience—the principal benefits of competition—should not guide antitrust analysis. They argue that Congress enacted the antitrust statutes not as consumer welfare prescriptions but to advance a vision of competition among small, local businesses.⁸¹ This hypothesis is erroneous and misleading. Very few lawmakers—if any—have been elected with an agenda promising to sacrifice efficiency, low prices, and convenience to protect small local businesses.⁸² The idea that an economy with many small middlemen is more competitive than an economy with a few large intermediaries is comparable to the proposition that high-friction economy is superior to frictionless economy.

The driving force behind the digital economy has been the ability to eliminate friction and improve efficiencies through the migration of activities from physical to virtual venues.⁸³ In virtual venues, interacting parties can inexpensively explore opportunities and interact with others regardless of their location and whenever they wish to do so.⁸⁴ In the 1990s, many people believed that direct-to-consumer business models would dominate the digital economy. Bill Gates famously argued in the mid-1990s that the “electronic marketplace” would be “the ultimate go-between, the universal middleman.”⁸⁵ He predicted “a new world of low-friction, low-overhead capitalism, in which market information will be plentiful and transaction costs low.”⁸⁶ This new world, Gates envisioned, would be a “shopper’s heaven.”⁸⁷ But, as explained, digital gatekeepers use low-friction environments to create demands for their intermediation services while preserving and creating friction to generate profit.

Figure 2.

The tech octopus, Esquire (March 2018).

As commonly used, the term “digital platform” (or “online platform”) refers to a virtual intermediation service. Familiar examples of digital platforms include online marketplaces, social media networks, streaming platforms, ridesharing services, app stores, online dating services, and so forth. In contrast, “digital ecosystems” are business enterprises that integrate several digital platforms and other lines of business so that each business arm strengthens the others and, together, the arms entrench the market positions of the ecosystem in the relevant economic sectors. This architecture invites descriptions of digital ecosystems as monster octopuses whose tentacles reach into every industry, strangle freedom, spread misery, and grow endlessly. Alternatively, ecosystems can be described as arrays of magical gardens. The gardens lure people into the ecosystems and surround them with low-hanging fruits and beautiful flowers of the kinds they like. The convenience and temptations intend to persuade people to concentrate their activities within the ecosystem, and, if they must leave for some reason, return as quickly as possible. New business arms (“gardens”) intend to improve the value of concentrating activities within the ecosystem and reduce incentives to leave it. This mode of integration—intertwined integration of multiple lines of business—was not feasible in the twentieth century.

To illustrate the complexity of digital ecosystems, consider the architecture of Amazon. The company describes its ecosystem as a “flywheel” whose gears reinforce each other to accelerate the spinning of the flywheel itself.⁸⁸ In this business model, Amazon’s arms are the gears and acceleration means growth.⁸⁹ Amazon Prime, the company’s membership program, is “the ﬂypaper on Amazon’s ﬂywheel.”⁹⁰ Critics of the company consider the flywheel model as “a metaphor for monopolization.”⁹¹ They correctly observe that “momentum in each area of [Amazon’s] business drives momentum in others, creating a machine that spins ever faster.”⁹² In this spirit, the 2020 US Congressional Report, Investigation of Competition in Digital Markets, describes Amazon Prime as “[t]he most prominent example of Amazon’s use of strategic losses to lock customers into the platform’s ecosystem.”⁹³ In 2022, there were in the United States about 153 million Amazon Prime members (households and businesses).⁹⁴ Commentators who call the public to sacrifice low prices and convenience to advance other values should try to persuade Prime members to cancel or not to renew their membership. Lawmakers who call to break up Amazon should experiment with campaigns promising to outlaw Amazon Prime.

Founded in 1994 with an ambitious aspiration to become earth’s biggest bookstore,⁹⁵ over the past three decades, Amazon has built a massive digital ecosystem.⁹⁶ The company went public in May 1997,⁹⁷ promising investors that it would focus on the “long term” and the “ability to extend and solidify” its “market leadership position.”⁹⁸ Barron’s cautioned investors that “Amazon’s business plan can easily be duplicated and that the company could end up down the same rabbit hole occupied by once-hot Internet-access providers.”⁹⁹ At the time, the winner-take-most dynamics was still an academic hypothesis. In his 1999 letter to shareholders, Jeff Bezos described the company’s vision:

We . . . work hard to grow the number of customers who shop with us, the number of products they purchase, the frequency with which they shop, and the level of satisfaction they have when they do so.

We are working to build a place where customers can find and discover anything they want to buy, anytime, anywhere . . . . So, as we expand our offering, we create a virtuous cycle for the whole business. The more frequently customers visit our store, the less time, energy, and marketing investment is required to get them to come back again. In sight, in mind.

. . . To us, operational excellence implies two things: delivering continuous improvement in customer experience and driving productivity, margin, efficiency, and asset velocity across all our businesses.¹⁰⁰

This vision captures the essence of digital ecosystems.¹⁰¹ What Bezos once described as a “virtuous cycle” is now known as “Amazon’s flywheel.” Strategy guru Jim Collins introduced the flywheel metaphor in his 2001 book, Good to Great, to explain persistent growth strategies:

The flywheel image captures the overall feel of what it [is] like inside the companies as they [go] from good to great. No matter how dramatic the end result, the good-to-great transformations never happen[s] in one fell swoop. There [is] no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process—step by step, action by action, decision by decision, turn by turn of the flywheel—that adds up to sustained and spectacular results.¹⁰²

Collins studied successful twentieth-century companies, such as Circuit City, Fannie Mae, Gillette, Philip Morris, and Walmart. Their success inspired the flywheel metaphor. Collins’s book was an instant bestseller.¹⁰³ Amazon’s leadership realized that Collins’s flywheel captured well Bezos’s virtuous cycle.¹⁰⁴

Today, Amazon’s flywheel defines the company’s identity and corporate culture, and the word “flywheel” is reportedly used “religiously” by insiders.¹⁰⁵ It is the company’s most admired and most feared organizational feature.¹⁰⁶ It represents the company’s relentless effort to improve efficiencies, grow, and expand. Its effectiveness has lured consumers, fascinated investors, intimidated actual and potential rivals, and alarmed many observers.¹⁰⁷

The contrast between the popularity of and animosity toward digital ecosystems epitomizes the friction paradox. Populist assertions that society should break up the digital ecosystems and outlaw their business models are consistent with the old desire to eradicate the middleman, conflict with the public obsession with low-friction markets, and reject the practical need to consider tradeoffs.

VII. Conclusion

The friction paradox that this article identifies is an expression of old controversies concerning tradeoffs between competition and efficiency. Technological advancements have dramatically expanded the capacity to harness economies of scale and scope. This reality, in turn, led to the rise of a handful of massive intermediaries that hold considerable power over access to markets and tilt the playing field in their favor. Many commentators have argued that lax antitrust enforcement allowed digital gatekeepers to form and grow, and, correspondingly, the reinvigoration of antitrust enforcement will deconcentrate the economy, restore competition, protect democracy and liberty, advance prosperity, level the playing field, and promote equality. President Biden’s Executive Order 14036, Promoting Competition in the American Economy, embraces this vision.¹⁰⁸

While vigorous antitrust enforcement has many virtues, it cannot address many social and economic problems. On the contrary, the competitive process incentivizes firms and entrepreneurs to develop advanced technologies that further expand the capacity to benefit from economies of scale and scope, while their complexity deepens technological divides. The friction paradox captures this dimension of the less desirable consequences of the competitive process.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

1.

To recruit support for his bill, Senator John Sherman stated that the bill “[did] not announce a new principle of law, but applie[d] old and well recognized principles of the common law.” 21 Cong. Rec. 2456 (Mar. 21, 1890).

2.

In Addyston Pipe, then Circuit Judge William Howard Taft pointed out that the Sherman Act modified the common law of restraints of trade: “Contracts that were unreasonable restraint of trade at common law were not unlawful . . . but were simply void, and were not enforced by the court . . . . The effect of the [Sherman Act] is to render such contracts unlawful in an affirmative or positive sense.” United States v. Addyston Pipe & Steel Co., 85 F. 271, 279 (6th Cir. 1898).

3.

Northern Pac. Ry. Co. v. U.S., 356 U.S. 1, 4 (1958).

4.

See Technology and Competition: Collusion and Collisions, Economist, Feb. 27, 2021, at 49; The Dust-Up, Economist, Feb. 27, 2021, at 9; W. Brian Arthur, Increasing Returns and the New World of Business, 74 Harv. Bus. Rev. 100 (1996); W. Brian Arthur, Increasing Returns and Path Dependence in the Economy (1994).

5.

See, e.g., Barak Orbach, Middlemen Forever: Competition and Opportunism in the Digital Economy, Concurrences N° 4-2021 (Nov. 2021) 30; Daniel F. Spulber, Market Microstructure and Intermediation, 10(3) J. Econ. Persp. 135 (1996); Ariel Rubinstein & Asher Wolinsky, Middlemen, 102 Q. J. Econ. 581 (1987).

6.

See, e.g., Ohio v. American Express Co., 138 S.Ct. 2274 (2018); United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003).

7.

See, e.g., Edna Bonacich, A Theory of Middleman Minorities, 38(5) Am. Soc. Rev. 583 (1973); Abba P. Lerner, The Myth of the Parasitic Middleman: “Productive” and “Unproductive” Labor, 8 Commentary 45 (1949); Postscript, Spectator, Apr. 12, 1845, at 347 (quoting Benjamin Disraeli describing the middleman as a person “who bamboozles one party and plunders the other”).

8.

See Barak Orbach, Do Antitrust Disruptors Make Good Reformers? 20 Berkley Bus. L.J. 118 (2023).

9.

See, e.g., House Judiciary Committee’s Subcommittee on Antitrust, Commercial and Administrative Law, Investigation of Competition in Digital Markets: Majority Staff Report and Recommendations 6 (Oct. 2020), https://perma.cc/74YN-WRW2 (“House Report”); FTC Chair Lina M. Khan, Vision and Priorities for the FTC, Memorandum to Commission Staff and Commissioners (Sept. 22, 2021), (“Research documents how gatekeepers and dominant middlemen across the economy have been able to use their critical market position to hike fees, dictate terms, and protect and extend their market power. Business models that centralize control and profits while outsourcing risk, liability, and costs also warrant particular scrutiny.”).

10.

See, e.g., Joe Biden, United Against Big Tech Abuses, Wall St. J., Jan. 12, 2023, at A15; Exec. Order No. 14036, Promoting Competition in the American Economy, 86 Fed. Reg. 36987 (July 14, 2021), https://perma.cc/NCX5-FBTX; House Report, supra note 5; Acting Assistant Attorney General Peter Hyun, letter to the Senate Judiciary Committee, Mar. 28, 2022, https://perma.cc/M55W-EQRJ (“[T]he rise of dominant platforms [presents] a threat to open markets and competition, with risks for consumers, businesses, innovation, resiliency, global competitiveness, and our democracy.”); Sen. Amy Klobuchar, Klobuchar, Grassley, Colleagues to Introduce Bipartisan Legislation to Rein in Big Tech (Press Release, Oct. 14, 2021), https://perma.cc/SF4K-QRGF; Rep. David N. Cicilline, House Lawmakers Release Anti-Monopoly Agenda for “A Stronger Online Economy: Opportunity, Innovation, Choice” (Press Release, June 11, 2021), .

11.

See, e.g., Jaewon Kang, Whole Foods Asks Suppliers to Help in Bid to Lower Prices, Wall St. J., Feb. 1, 2023, at B13; Micah Maidenberg & Jaewon Kang, Store Brands Pinch Food Makers, Wall St. J., July 29, 2019, at B1; Alistair Gray & Shannon Bond, US Retailers Fight Tradition With Own Brands, Fin. Times, Mar. 18, 2019, at 8; Julie Creswell, Amazon the Brand-Buster, N.Y. Times, June 24, 2018, at BU1; Stephen Wilmot & Aaron Back, Grocers Are Squeezed On Nearly All Sides, Wall St. J., June 13, 2018, at B1.

12.

See, e.g., Marina Krakovsky, The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit (2015); Bonacich, supra note 7; Lerner, supra note 7.

13.

See, e.g., William L. Letwin, English Common Law Concerning Monopolies, 21 U. Chi. L. Rev. 355 (1954); Wendell Herbruck, Forestalling, Regrating and Engrossing, 27 Mich. L. Rev. 365 (1929).

14.

Herbruck, id.

15.

Hans B. Thorelli, The Federal Antitrust Policy 16 (1955).

16.

Letwin, supra note 13, at 370.

17.

Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations (1776), book vi, ch. 5.

18.

William Howard Taft, The Anti-Trust Act and the Supreme Court 17–18 (1914).

19.

21 Cong. Rec. 2564-2565 (Mar. 24, 1890). See also Theodore W. Dwight, The Legality of “Trusts,” 3 Pol. Sci. Q. 592 (1888) (arguing that the middleman offenses could not apply to the trusts).

20.

See, e.g., Rachel Roubein & McKenzie Beard, Lawmakers Are Readying Fresh Attacks On Pharmacy Middlemen, Wash Post, Jan. 13, 2023, https://perma.cc/X52Q-PT8E; Fed. Trade Comm’n, FTC Launches Inquiry Into Prescription Drug Middlemen Industry (Press Release, June 7, 2022), .

21.

Epic Games, Inc. v. Apple Inc., 559 F.Supp.3d 898, 922–23 (N.D.Cal. 2021).

22.

Joanna Stern, Stuck in Apple’s World? Here’s What You’re Missing, Wall St. J., June 5, 2021, at B8.

23.

Id.

24.

Farhard Manjoo, How Scary Is Apple’s Power? N.Y. Times, Apr. 1, 2021, at A22.

25.

See, e.g., Sarah E. Needleman, Games Group Presses App Stores, Wall St. J., Sept. 25, 2020, at B1.

26.

See, e.g., Tim Higgins, Cook Defends Apple Privacy Policy, Wall St. J., Apr. 13, 2022, at B4; Tim Higgins, Judge Presses Apple CEO Cook Over App Store Payment Policy, Wall St. J., May 22, 2021, at A1. See also Jessica Grose, How to Separate Parents from Their Money, N.Y. Times, Apr. 30, 2022, ; Patience Haggin & Tim Higgins, Firms Plot How to Beat Apple’s New Ad Limits, Wall St. J., Mar. 27, 2021, at A1; Julie Jargon, Cutting Videogame Spending, Wall St. J., June 23, 2021, at A17.

27.

Dan Gallagher, Apple, Google Could Win from App Loss, Wall St. J., Sept. 15, 2021, at B15.

28.

See Epic Games, Inc. v. Apple Inc., 559 F.Supp.3d 898 (N.D.Cal., 2021); Sarah E. Needleman, Epic CEO Slams Apple’s Fees As Unfair On Trial’s First Day, Wall St. J., May 4, 2021, at A1; Sarah E. Needleman, Apple, Google Drop ‘Fortnite’ App After Game Attempts to Skirt Fees, Wall St. J., Aug. 14, 2020, at A1.

29.

Lesley Fair, Record-Setting FTC Settlements With Fortnite Owner Epic Games Are the Latest “Battle Royale” Against Violations of Kids’ Privacy and Use of Digital Dark Patterns, FTC Bus. Blog, Dec. 19, 2022, . See also Natasha Singer, Epic Games to Pay Fine for Charges On Privacy, N.Y. Times, Dec. 20, 2022, at B1.

30.

See, e.g., S. 2710, Open App Markets Act, 117th Cong., 2d. Sess. (Feb. 17, 2022), https://bit.ly/3YagYO3; Sen. Richard Blumenthal, Blumenthal, Blackburn & Klobuchar Introduce Bipartisan Antitrust Legislation to Promote App Store Competition (Press Release, Aug. 11, 2021), https://perma.cc/U3S2-FVA2; Kris Holt, Senate Bill Targeting Apple and Google In-App Payments Moves Forward, Engadget, Feb. 3, 2022, .

31.

U.S. Dept. Commerce, Competition in the Mobile Application Ecosystem 2 (Feb. 2023), .

32.

Slaughter-House Cases, 83 U.S. 36 (1872).

33.

See Herbert Hovenkamp, Technology, Politics, and Regulated Monopoly: An American Historical Perspective, 62 Tex L. Rev. 1263, 1296–305 (1984).

34.

Ronald M. Labbé & Jonathan Lurie, The Slaughterhouse Cases (2003).

35.

Oscar Gelderblom, Abe de Jong, & Joost Jonker, The Formative Years of the Modern Corporation: The Dutch East India Company VOC, 1602–1623, 73 J. Econ. Hist. 1050 (2013); Ann M. Carlos & Stephen Nicholas, “Giants of an Earlier Capitalism”: The Chartered Trading Companies as Modern Multinationals, 62 Bus. Hist. Rev. 398 (1988).

36.

Giuseppe Dari-Mattiacci, Oscar Gelderblom, Joost Jonker, & Enrico C. Perotti, The Emergence of the Corporate Form, 33 J. L. Econ. & Org. 193 (2017); Jonathan G. S. Koppell ed., Origins of Shareholder Advocacy (2011).

37.

Int’l Boxing Club of New York, Inc. v. United States, 358 U.S. 242 (1959).

38.

See Barak Orbach, The Fight of the Century: On the Exploitation of Social Divides, 14 NYU J. L. & Liberty 163 (2020); Barak Orbach, Prizefighting and the Birth of Movie Censorship, 21 Yale J. L. & Human. 251 (2009).

39.

See Arthur M. Wirtz, Team Owner, Dies, N.Y. Times, July 22, 1983, at B7; Arthur Wirtz, Multimillionaire Sorts, Real Estate Magnate, Chi. Trib., July 22, 1983, at B4; James Norris, 73, Sports Promoter, N.Y. Times, Dec. 5, 1952, at 27; James Norris, 73, Sportsman, Broker Is Dead, Chi Trib., Dec. 5, 1952, a II–9.

40.

United States v. Int’l Boxing Club of New York, Inc, 150 F.Supp. 397, 410 (S.D.N.Y. 1957) (“IBC”).

41.

IBC, 150 F.Supp. at 410.

42.

International Boxing Club, 358 U.S. at 245–46.

43.

IBC, 150 F.Supp. at 410–11.

44.

Id. at 410.

45.

Id.

46.

For the anti-chain store movement see Daniel Scroop, The Anti-Chain Store Movement and the Politics of Consumption, 60 Am. Q. 925 (2008); Richard C. Schragge, The Anti-Chain Store Movement, Localist Ideology, and the Remnants of the Progressive Constitution, 1920-1940, 90 Iowa L. Rev. 1011 (2005). For the anti-big box store movement see Raffaella Sadun, Does Planning Regulation Protect Independent Retailers?, 97 Rev. Econ. & Stat. 983 (2015); Emek Basker, The Causes and Consequences of Wal-Mart’s Growth, 21(3) J. Econ. Persp. 177 (Summer 2007); Barry C. Lynn, Breaking the Chain, Harper’s Mag., July 2006, at 29.

47.

See Barak Orbach, Hub-and-Spoke Conspiracies, 15(4) Antitrust Source 1 (Apr. 2016).

48.

See, e.g., United States v. Apple, Inc., 791 F.3d 290 (2d Cir. 2015); Toys “R” Us, Inc. v. FTC (TRU), 221 F.3d 928 (7th Cir. 2000); Interstate Circuit v. United States, 306 U.S. 208 (1939).

49.

See, e.g., United States v. General Motors Corp., 384 U.S. 127 (1966); United States v. Parke, Davis & Co., 362 U.S. 29 (1960).

50.

Eastern States Retail Lumber Dealers’ Association v. United States, 234 U.S. 600 (1914).

51.

Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U.S. 373 (1911).

52.

Letter from Oliver W. Holmes, Jr. to Sir Frederick Pollock (Apr. 23, 1910), in 1 Holmes-Pollock Letters 163. (Mark DeWolfe Howe ed. 1942).

53.

Dr. Miles, 220 U.S. at 412 (1911).

54.

See, e.g., Leegin Creative Leather Products, Inc. v. PSKS, Inc., 551 U.S. 877 (2007); Eastman Kodak Co. v. Image Technical Services, Inc., 504 U.S. 451 (1992); Continental T. V., Inc. v. GTE Sylvania Inc., 433 U.S. 36 (1977); United States v. Arnold, Schwinn & Co., 388 U.S. 365 (1967); White Motor Co. v. U.S., 372 U.S. 253 (1963); United States v. Colgate & Co., 250 U.S. 300 (1919).

55.

United States v. Terminal Railroad Association of St. Louis, 224 U.S. 383 (1912); Associated Press v. United States, 326 U.S. 1 (1945).

56.

Klor’s, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207 (1959).

57.

Lorain Journal Co. v. United States, 342 U.S. 143 (1951).

58.

Fashion Originators’ Guild Am. v. FTC, 312 U.S. 457 (1941).

59.

United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001).

60.

PLS.Com, LLC v. National Association of Realtors, 32 F.4th 824 (9th Cir. 2022); US Airways, Inc. v. Sabre Holdings Corporation, 938 F.3d 43 (2d Cir. 2019); Alaska Airlines, Inc. v. United Airlines, Inc., 948 F.2d 536 (9th Cir. 1991).

61.

Brown Shoe Co. v. United States, 370 U.S. 294, 344 (1962). See also FTC v. Procter & Gamble Co., 386 U.S. 568, 580 (1967) (stating that “[p]ossible economies cannot be used as a defense to illegality [under the antitrust laws].”); United States v. Von’s Grocery Co., 384 U.S. 270, 274–76 (1966) (stating that the antitrust laws intend to “preserve competition among a large number of sellers.”).

62.

Brown Shoe, 370 U.S. at 344.

63.

United States v. Aluminum Co. of Am., 148 F.2d 416, 429 (2d Cir. 1945).

64.

United States v. New York Great Atlantic & Pacific Tea Co., 173 F.2d 79 (7th Cir. 1949).

65.

See Debbie Feinstein, Staples and Office Depot—Then, Again, and Forever?, 35(2) Antitrust 7 (Spring 2021).

66.

United States v. AT&T, Inc., 916 F.3d 1029 (D.C. Cir. 2019).

67.

James B. Stewart, How a Media Megadeal Went So Bad So Fast, N.Y. Times, Nov. 20, 2022, at 4.

68.

At the time of writing this Article, no formal action was filed to unwind Live Nation’s acquisition of Ticketmaster. However, criticism of this approved merger built a momentum that might result in such action.

69.

See, e.g., Ohio v. American Express Co., 138 S.Ct. 2274 (2018) (credit card company); NCAA v. Board of Regents, 468 U.S. 85 (1984) (sports leagues); Broadcast Music, Inc. v. Columbia Broadcasting System, Inc., 441 U.S. 1 (1979) (performing rights clearing houses); Board of Trade v. United States, 246 U.S. 231 (1918) (commodity exchange); PLS.Com, LLC v. National Association of Realtors, 32 F.4th 824 (9th Cir. 2022) (real estate listing network); US Airways, Inc. v. Sabre Holdings Corporation, 938 F.3d 43 (2d Cir. 2019) (airline booking platform); United States v. Visa U.S.A., Inc., 344 F.3d 229 (2d Cir. 2003) (credit card companies).

70.

See Orbach, Hub-and-Spoke Conspiracies, supra note 47.

71.

United States v. Topco Associates, Inc., 405 U.S. 596, 609 n. 10 (1972).

72.

GTE Sylvania, 433 U.S. at 49.

73.

Id. 58–59.

74.

See generally Herbert Hovenkamp, The Rule of Reason, 60 Fl. L. Rev. 81 (2018).

75.

American Express, 138 S.Ct. at 2290.

76.

See Credit Suisse Securities (USA) LLC v. Billing, 551 U.S. 264, 282–83 (2007); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554 (2007); Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 414–15 (2004); Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 588 (1986); Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1 (1984) (formulating the antitrust’s false-positive principle).

77.

American Express, 138 S.Ct. at 2284.

78.

See, e.g., Assistant Attorney General Jonathan Kanter, Antitrust Enforcement: The Road to Recovery (Keynote Remarks, the University of Chicago Stigler Center, Apr. 21, 2022), .

79.

86 Fed. Reg. 36987 (July 14, 2021).

80.

See, e.g., Assistant Attorney General Jonathan Kanter, Milton Handler Lecture (Remarks, New York City Bar Association, May 18, 2022), ; Kanter, Antitrust Enforcement: The Road to Recovery, supra note 78; Trustbusting: All-Consuming, Economist, Jan. 29, 2022, at 11; Greg Ip, Latest Antitrust Approach Has Its Own Risks, Wall St. J., July 8, 2021, at A2.

81.

See supra notes 38–40 and accompanying text.

82.

See generally Orbach, Do Antitrust Disruptors Make Good Reformers? supra note 8; Amy Klobuchar, Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age (2021); Matt Stoller, Goliath: The 100-Year War Between Monopoly Power and Democracy (2019); Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age (2018); Tim Wu, The Tyranny of Convenience, N.Y. Times, Feb. 18, 2018, at SR1; Lina Khan, The New Brandeis Movement: America’s Antimonopoly Debate, 9 J. Eur. Competition L. & Practice 131 (2018).

83.

See Barak Orbach, Anything, Anytime, Anywhere: Is Antitrust Ready for Flexible Market Arrangements? 20(2) Antitrust Source 1 (Apr. 2021); Avi Goldfarb & Catherine Tucker, Digital Economics, 57 J. Econ. Lit. 3 (2019).

84.

See Orbach, Anything, Anytime, Anywhere, supra note 83.

85.

Bill Gates, The Road Ahead 158 (1995).

86.

Id.

87.

Id.

88.

See Brad Stone, The Everything Store: Jeff Bezos and the Age of Amazon 287–98 (2013).

89.

See Charles Duhigg, The Unstoppable Machine, New Yorker, Oct. 21, 2019, at 42.

90.

Relentless.com, Economist, June 21, 2014, at 23.

91.

Stacy Mitchell, Don’t Let Amazon Get Any Bigger, N.Y. Times, Oct. 9, 2020, at A27.

92.

Id.

93.

House Report, supra note 5.

94.

Daniela Coppola, Amazon Prime: Statistics & Facts, Statista (Nov. 17, 2022), .

95.

See Makeda Easter & Paresh Dave, Shelf-Assured, L.A. Times, June 19, 2017, at A8; Karen Southwick, Jeff Bezos, Amazon.com, Upside, Oct. 1996, at 29.

96.

See And On the Second Day . . ., Economist, June 20, 2020, at 15; The Genius of Amazon, Economist, June 20, 2020, at 7; Amazon: Beyond Shopping, in Special Report: The New Bazaar, Economist, Oct. 28, 2017, at 4; Primed, Economist, March 25, 2017, at 18; Amazon’s Empire, Economist, March 25, 2017, at 7; Relentless.com, Economist, June 21, 2014, at 23; How Far Can Amazon Go?, Economist, June 21, 2014, at 11.

97.

A New Page in Competition, Wall St. J., May 22, 1997, at B6.

98.

Jeff Bezos, 1997 Letter to Shareholders, https://perma.cc/YEQ2-5KR3. See also Amazon Com Inc., Form S-1 (Mar. 24, 1997), (expressing confidence in the company’s “ability to establish and maintain long-term relationships with its customers and encourage repeat visits and purchases.”).

99.

Scott Reeves, Offerings in the Offing: Web’s Biggest Bookstore? Don’t Make Book On It, Barron’s, May 12, 1997, at 57.

100.

Jeff Bezos, 1999 Letter to Shareholders, (emphasis added).

101.

Taking the Long View, Economist, Mar. 3, 2012, at 21.

102.

Jim Collins, Good to Great: Why Some Companies Make the Leap. . .And Others Don’t 165 (2001).

103.

Adam Bryant, For This Guru, No Question Is Too Big, N.Y. Times, May 24, 2009, at BU1.

104.

Jim Collins, Turning the Flywheel: A Monograph to Accompany Good to Great 6–8 (2019).

105.

Brian Dumaine, Bezonomics 11–20 (2020); Duhigg, The Unstoppable Machine, supra note 89.

106.

Charles Duhigg, supra note 89, at 42, 44.

107.

See, e.g., Stacy Mitchell, Don’t Let Amazon Get Any Bigger, N.Y. Times, Oct. 9, 2020, at A27; The Genius of Amazon, Economist, June 20, 2020, at 7; Duhigg, The Unstoppable Machine, supra note 89, at 44; Primed, Economist, Mar. 25, 2017, at 18; Relentless.com, Economist, June 21, 2014, at 23.

108.

86 Fed. Reg. 36987 (July 14, 2021).