Regulatory Policy

House Hearing Reminds Conservatives of the Dangers of Progressive Proposals for Tech Companies

Workers sort arriving products at an Amazon fulfillment center in Tracy, Calif., August 3, 2015. (Robert Galbraith/Reuters)
The idea that tech companies are monopolies is not borne out by the facts.

In the wake of a recent House hearing on tech and antitrust, the Democratic majority released a report that called for a dramatic antitrust action against alleged tech monopolies. If this report focused on any other area of the economy, conservatives would be denouncing it as a dangerous and unwarranted intervention in the economy. But because many conservatives have grievances of their own against big tech companies, this dangerous proposal has largely flown under the radar.

The idea that tech companies have a monopoly on their respective industries is at the core of the House report’s recommendations, but it’s not confined to House Democrats alone. More than half of Americans support breaking up tech companies that have “too much power,” despite generally positive opinions of individual tech companies.

But the idea that tech companies have too much power generally comes from a misunderstanding of what their markets really are. After all, Facebook and Twitter are the major players when it comes to social media, but “social media” is not Facebook or Twitter’s market. Their markets are online advertising. “Social media” doesn’t make these companies money. What is profitable is the attention that they can command, which makes advertising on the platforms valuable.

That means that Facebook and Twitter are competing online not just with other social-media companies, but also with news outlets, blogs, job-search sites — any content that commands eyeballs, whether online, print, or video.

Only by using deceptive market definitions can one claim that companies such as Amazon and Apple have monopoly status. Amazon may be the largest web retailer, but it competes with thousands of companies large and small in a retail segment that is still dominated by brick-and-mortar sales, with 84 cents of every dollar being spent in a brick-and-mortar store rather than online. And while Apple does control access to its App Store (much the way grocery stores control what products are sold in their establishments), it ranks third in market share for smartphone sales and operating systems.

In any event, the concern when it comes to monopolies is the harm they can do to consumers that lack alternatives. But recent experience shows that consumers are far from powerless. Facebook should know better than any company how fragile dominance of the social-media landscape can be — after all, it shouldered aside Myspace over a decade ago, back when Myspace was seen by some as a monopoly itself.

It’s also important to note that, no matter how much your teenage children might use it, social media is not an essential service. If a consumer feelshe is are being taken advantage of by every available option in the social-media landscape, he can log off. Facebook has already seen a user drop-off in large part due to consumer concerns about data privacy.

A federal dive into tech antitrust actions would be worse than just unnecessary. It could threaten the business model that provides content that tens of millions of Americans enjoy every day without paying a dime. Expanding the scope of antitrust enforcement risks regulatory capture, by which influential and well-connected businesses steer antitrust actions against their competitors. Monopolies can be harmful to consumers, but overzealous regulators can be far worse.

Conservatives may not be in love with tech companies at the moment, nor should these businesses be above reproach. But in this case, the idea that tech companies are monopolies desperately needing to be broken up is not borne out by the facts.

Andrew Wilford is a policy analyst with the National Taxpayers Union Foundation, a nonprofit dedicated to tax-policy research and education at all levels of government.

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