Regulatory Policy

Don’t Change Antitrust Law to Undermine Tech Companies and Consumers

Packages at an Amazon fulfillment center in Robbinsville, N.J, November 2017. (Lucas Jackson/Reuters)
The House's proposed antitrust reform disregards consumer welfare.

A new House Judiciary Committee report on competition in the technology industry starts from the premise that everything Amazon, Apple, Facebook, and Google do is unscrupulous, and then works its way backward with anecdotes, distortions of long-accepted business practices, and sometimes unattributed numbers. But the biggest threat the report poses is its recommendation to rewrite U.S. antitrust law and abandon the consumer-welfare standard. A change that abandons the primacy of consumer welfare threatens to harm consumers instead.

A traditional case against these tech giants is hard to prove: Innovation is the norm, costs are falling if not already at zero, and Americans have benefited from these firm’s products — especially during the COVID pandemic. It’s hard to imagine being quarantined at home or trying to keep a business afloat without the services of Amazon’s online shopping, Facebook’s facilitation of communicating curbside pick-up options, Google’s maps for home deliveries, and Apple’s devices to enable it all. Consumer welfare abounds.

That’s due in large part to intense competition. Google has Amazon nipping at its advertising revenue heels. Amazon is watching Walmart, the nation’s largest retailer, roll out a same-day home-delivery service. Apple competes with Google’s Android operating system and Google’s app store, Google Play. Facebook competes with Google and Amazon for online advertising dollars and against other social-media platforms, like Twitter, Google’s YouTube, TikTok (for now), Pinterest, and Snapchat for eyeballs.

By conventional metrics, the tech industry has been an unqualified boon to the U.S. Hence the report’s advocacy for rewriting U.S. antitrust law to expand its regulatory reach, irrespective of consumer welfare.

The lack of evident market failure in the tech sector makes the proposed remedies even more absurd. The report’s suggested restrictions on mergers and acquisitions would take away an incentive for entrepreneurs to start new businesses, because plenty of brilliant innovators would like to cash out at some point. This is piled on top of current financial regulations that already make IPOs increasingly costly and difficult. Broadly, the report recommends growing regulatory power and increasing bureaucratic funding. Heavily regulated industries are ipso facto less innovative, so more regulation is the last thing the sputtering U.S. economy needs right now.

In fact, all of these more-government approaches risk locking giant corporations in their dominant positions by erecting government barriers to entry.

One example is the call for a Glass-Steagall Act for big tech. Glass-Steagall was a Great Depression-era regulation that separated investment banking from retail banking. Today’s parallel is to prevent Amazon from acting as both a platform host to third-party sellers and as a seller of its own generic brands on that same platform, Amazon.com. For the same reasons Glass-Steagall regulations resulted in more harm than good, consumers would also be harmed by the break-up of Amazon’s third-party market from its sale of popular generics. Foreign competitors would have a field day.

As my CEI colleagues, John Berlau and Daniel Press noted in a paper on the perils of the Glass-Steagall Act, “in 1960, six of the world’s 10 largest banks were based in the United States, while by 1980 only two U.S. banks were in the top 10. By 1989, there was not a single U.S.-based bank in the global top 25. Given the globalization of financial markets, it was increasingly damaging to prohibit U.S. banks from engaging in activities performed by their global competitors.” Berlau and Press go on to note that this was a big part of the basis for the eventual bipartisan partial repeal of Glass-Steagall in the Gramm-Leach-Bliley Act of 1999. The tech industry is similarly, if not more, global in nature and is vulnerable to the same type of international competition. Why repeat the same mistake the U.S. made in the banking sector in the tech sector?

Given the alternative, it’s better to let the marketplace distribute resources, let private capital coordinate economies of scale and let entrepreneurs innovate. Consumers have benefited from this light regulatory touch for decades. Congress doesn’t have as impressive of a track record for serving Americans, so let’s not put lawmakers in charge of picking winners and losers in consumer technology.

Jessica Melugin is the associate director of the Center for Technology and Innovation at the Competitive Enterprise Institute.

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