Gatekeeping and Antitrust: How Tech Platforms Create Unique Monopoly Risks

On August 5, 2024, federal Judge Amit Mehta ruled that Google held monopoly power in search and search text advertising, violating Section 2 of the Sherman Antitrust Act. The decision centered on how Google paid Apple, Samsung, and other device makers billions of dollars annually to be the default search engine—a practice that courts found created what the judge called "choice friction," where even a small burden of switching prevents users from leaving.

The case illustrates why antitrust law applies differently to tech platforms than to traditional corporations. While the Sherman Act has governed business conduct since 1890, digital platforms operate through network effects, control essential infrastructure that competitors depend on, and use exclusive dealing in ways that create competitive barriers that traditional analysis often misses. Courts, regulators, and economists are now adapting century-old legal frameworks to address these distinct mechanisms of dominance.

Network Effects and Market Defensibility

A network effect occurs when a product becomes more valuable as more people use it. A search engine is more valuable to advertisers when it has more users; a social platform is more valuable to users when more of their contacts are there. These dynamics differ fundamentally from traditional industries. A railroad company's dominance rests on physical infrastructure that is expensive to replicate. A tech platform's dominance rests partly on the expectation that users and businesses will cluster where everyone else is—a self-reinforcing cycle.

This creates what regulators call a "gatekeeper" position. When a platform controls the primary way users reach a service or market, it can determine who competes and on what terms. Unlike traditional gatekeepers like railroads, which control physical chokepoints, digital platforms control informational access. They decide whose products appear in search results, whose apps reach users, and whose data gets analyzed. This gives them dual leverage: they can compete in the downstream market while simultaneously controlling the terms on which rivals can reach it.

How Market Dominance Takes Shape: The Google Model

Google's path to dominance, as Judge Mehta's ruling documents, reveals the specific mechanism that distinguishes tech monopolies. At the time of the lawsuit, Google held dominant market positions in search across desktop and mobile devices. This dominance rests on exclusive distribution agreements rather than technical superiority alone. Google pays billions annually to be the default search engine on devices made by Apple and Samsung, making it the pre-selected option most users never change.

The court found that this creates "choice friction"—the term Judge Mehta used to describe how "even the small burden of making that switch is enough to prevent users" from changing their default search engine. Once locked in, users generate data that makes Google's search algorithm more valuable, which in turn justifies paying more for default placement. The profits from monopoly pricing of search text advertisements—which the court found Google charges at inflated rates because of its dominant position—fund the exclusive dealing agreements that maintain dominance. This cycle would be difficult to sustain in a traditional industry, where high prices typically attract new entry. Digital markets, by contrast, can sustain monopoly pricing while foreclosing competition.

How Courts Now Evaluate Market Power in Digital Markets

Traditional antitrust law evaluates market power by examining a company's market share, the barriers to entry in the industry, and how easily customers can switch to rivals. For tech platforms, courts are evolving these tests because they do not always predict competitive outcomes. A company might hold 90 percent market share and still face competitive pressure in a traditional market if entry barriers are low. But in markets exhibiting strong network effects, high market share combined with switching costs can indicate durable dominance.

Competition authorities now evaluate digital platforms on a case-by-case basis, examining the strength of network effects, the cost to users and businesses of switching platforms, and the ease with which new platforms can reach a critical mass of users. They consider whether the platform controls essential infrastructure—such as an app store, a default search position, or a payment system—that competitors depend on. They assess whether the firm uses its position in one market to foreclose competition in another, as when a platform's control over user access allows it to exclude competitors from an adjacent service.

This represents an adaptation of traditional market power analysis rather than a wholesale rejection of it. Courts still ask whether a firm can "act independently of the market," the classic definition from Sherman Act cases. But they now recognize that in digital markets, a firm can maintain that independence through network effects and exclusive dealing in ways that traditional industries could not.

Predatory Pricing in Digital Markets as Enforcement Frontier

Beyond dominance through exclusive dealing, regulators are focusing on predatory pricing—pricing below cost to drive out rivals and establish monopoly power. On December 18, 2024, the Federal Trade Commission held a public workshop titled "Competition Snuffed Out: How Predatory Pricing Harms Competition, Consumers, and Innovation," signaling a shift in enforcement priorities.

For decades, U.S. courts have been skeptical of predatory pricing claims, based on reasoning that became standard after a 1993 Supreme Court decision, Brooke Group. The skepticism rests on the logic that cutting prices below cost is irrational unless a predator can later raise prices above cost to recoup losses—and recouping usually requires maintaining monopoly power. Courts assumed this scenario was rare in practice. But the FTC concluded that "digital markets have enabled new pricing strategies that do not neatly map to old assumptions." A tech firm can cut prices or offer services free in one market while monetizing a dominant position in another through advertising or data. It can foreclose competition while maintaining revenues from network effects, data, and monopoly pricing elsewhere in its ecosystem.

FTC Commissioner Alvaro Bedoya expressed the view that predatory pricing is a common practice with underappreciated consequences. The agency appears positioned to bring more enforcement actions alleging predatory pricing in digital markets, potentially overturning decades of doctrinal skepticism about whether such pricing is economically viable.

What Makes Tech Antitrust Enforcement Distinct

The Sherman Act's prohibition on monopolization has existed since 1890. Section 2 makes it unlawful to "monopolize, attempt to monopolize, or conspire or combine to monopolize." The statute itself does not distinguish between tech companies and traditional industries. But enforcement authorities now recognize that tech platforms can achieve and maintain monopoly power through mechanisms—network effects, control of essential gateways, exclusive dealing, and cross-market leverage—that operate differently than in traditional businesses.

This has accelerated enforcement. Beyond the Google case, the FTC has challenged acquisitions by Meta, scrutinized Amazon's marketplace practices, and examined whether tech companies use algorithms to coordinate pricing in violation of antitrust law. The DOJ has signaled that benchmark pricing set through algorithms can constitute illegal price-fixing. These cases reflect a broader shift: regulators now treat platform gatekeeping and network dynamics as core antitrust concerns rather than permissible business practices.

What remains unsettled is how aggressively courts will enforce these evolved standards and whether predatory pricing doctrine will actually shift to match the FTC's December 2024 positions. The Google ruling establishes that exclusive dealing by a dominant platform can violate antitrust law, but the remedies phase—determining what Google must do to restore competition—continues. Judge Mehta's orders could range from requiring non-exclusive default contracts to forcing divestiture. That outcome will shape what tech companies can do and what future enforcement looks like.