Platform Interoperability Can Increase Competition

Platform interoperability can promote competition by facilitating a more robust and diverse online ecosystem. It also makes it possible for new entrants to quickly move into the market and compete with incumbents. Although interoperability is a technically precise functionality and it may be difficult for the government to mandate its implementation, we should encourage platforms to take steps to make their products and services interoperable. In addition, antitrust enforcers can assess the degree to which a company restricts platform interoperability as an indication of an anticompetitive practice on a case-by-case basis. The current antitrust framework, as detailed above, makes this assessment difficult, however. In the absence of a regulatory framework to promote interoperability, advocates should be calling for greater interoperability, and industry should offer open APIs to encourage others to interoperate and contribute to developing standards that promote interoperability.

Interoperability promotes competition. In order for users to be able to easily switch services or “multi-home” (the idea of belonging to more than one network) and still reach users of the original service, the two services must be interoperable. Data portability is the first step; users must be able to take their data with them (port it) when they choose to leave a service.¹ But portability is insufficient to promote competition if the individuals will not be able to use their data on a new service; interoperability is critical to ensuring that the data the consumer ports is compatible with different platforms. Together, data portability and interoperability substantially lower switching costs and empower consumers to move between firms more easily—or even at all.²

Together, data portability and interoperability substantially lower switching costs and empower consumers to move between firms more easily—or even at all.

Interoperability also promotes innovation. Open APIs enable other companies to build upon existing services and innovate by giving rivals access to or the ability to replicate necessary elements and functions. Interoperability also prevents lock-in effects, as discussed previously in this report, and makes it possible for new entrants to move into the market quickly. Without access to Google Contacts’ API, for instance, Facebook would not have been able to grow its network as fast as it did.³

To the extent possible within the current antitrust framework, antitrust enforcers should examine the novel ways that online platforms exert their gatekeeping power to inhibit new entrants and fair competition. Some behaviors may be considered an anticompetitive practice in certain scenarios, and antitrust enforcers may be able to apply tailored remedies, such as requiring interoperability, to ameliorate their effects. For instance, enforcers should carefully scrutinize as a potential anticompetitive practice any company’s actions to discontinue formerly open APIs or restrict access to APIs to stifle downstream competition that seeks to rely on access to key data and functionality offered through the API. In addition, they should assess whether a company undermines standards bodies by exerting so much influence that, as Mozilla’s Director of Public Policy Chris Riley wrote, it “co-opt[s], manipulate[s], or render[s] meaningless a standards body if the participation of that company is necessary for the collective set of companies to achieve critical mass.”⁴ These practices are not always anticompetitive, and antitrust enforcers must evaluate each individual company and scenario on a case-by-case basis.

…enforcers should carefully scrutinize as a potential anticompetitive practice any company’s actions to discontinue formerly open APIs or restrict access to APIs to stifle downstream competition that seeks to rely on access to key data and functionality offered through the API.

Antitrust enforcers do not necessarily have to alter their merger review process to accommodate these new theories of harm. The agencies already scrutinize whether vertical mergers can lead to competitive harm if the companies integrate in a closed fashion. As part of the enforcers’ analysis of the merged entity’s incentives post-merger, they should also consider the potential for anticompetitive harm if the company were to restrict or discontinue APIs that the merging companies offer third parties. Depending on the facts of the case, data portability and interoperability may serve as sufficient remedies for these problems. When appropriate, antitrust enforcers should rely on these tools as a proposed condition on a merger that would otherwise be anticompetitive, or for a company engaging in anticompetitive conduct in negotiating a settlement or pursuing litigation. For example, in 2001, when the Federal Communications Commission (FCC) found that the AOL/Time Warner merger would give the merged entity a significant and anticompetitive first-mover advantage in the market for advanced instant messaging services, it conditioned merger approval on an interoperability remedy.⁵ The FCC required AOL to either implement an industry-wide standard for interoperable instant messaging or create a protocol for interoperability with other instant messaging providers via contracts.⁶ While agencies with merger review jurisdiction may be able to intervene through merger conditions that are specifically tailored to prevent these anticompetitive risks, it’s worth noting that under antitrust statutes, agencies would only be able to intervene if they, or a judge, conclude that the merger is likely to result in anticompetitive harm.

Antitrust enforcers should also adopt a dominant platform presumption: A merger is anticompetitive if a dominant platform seeks to acquire a firm that has a substantial probability of entering the market absent the merger, or if the platform acquires a competitor in an adjacent market.⁷ As OTI and Public Knowledge detailed in joint comments to the FTC and Department of Justice (DOJ) on the proposed revisions to the vertical merger guidelines, a “platform with market power could substantially disadvantage firms in an adjacent market by refusing to interoperate with them. If a platform purchased one adjacent market firm, it would then benefit from preferencing the owned firm over competing adjacent market firms, either by denying interoperability or making interoperability difficult, thereby diverting substantial business to the owned firm.”⁸

Antitrust enforcers should also adopt a dominant platform presumption: A merger is anticompetitive if a dominant platform seeks to acquire a firm that has a substantial probability of entering the market absent the merger, or if the platform acquires a competitor in an adjacent market.

Interoperability promotes innovation by helping an entire ecosystem of players thrive—it enables new players to enter the market, and incumbent players to create new products and services based on those offered by other players. Interoperability also promotes network effects. The more people in a network, the more valuable it is. If a company interoperates with others, their network gets that much bigger. Therefore, industry should also promote greater interoperability.

Standard protocols that promote decentralized, open, and interoperable networks have already contributed to a more competitive ecosystem. For instance, there is a growing “Fediverse” of decentralized services that rely on the W3C-developed protocol “ActivityPub,” which in turn is based on the open “Activity Streams 2.0” standard.⁹ The Fediverse includes an open source Twitter-like service called Mastodon that runs on a decentralized network of servers and a YouTube-like service called PeerTube. Using the same protocols promotes interoperability. For example, a user on Mastodon can follow a user on PeerTube, and both users are able to watch and comment on the second user’s PeerTube videos from the Mastodon software client itself.

In the absence of regulations mandating interoperability, regulators should consider imposing interoperability conditions where appropriate. Advocates should also call for greater interoperability, while companies can lead by example and offer robust, open APIs and encourage others to interoperate. Companies should also contribute to the development of standards that advance the efficiency or capabilities of the network.