Congress should ease up on big tech companies.
Despite Amazon, Apple, Google and Facebook’s best efforts to help Americans during the COVID-19 pandemic, Democrats in the House and Senate continue to attack them, likening them to monopolies, and seeking to break them up. Congress’s economic illiteracy in understanding market power and antitrust is leading them down a dangerous path that will eventually lead to Americans being worse off due to less innovation in their lives.
On Wednesday, the House subcommittee on antitrust will hold a hearing with the CEOs of the four major tech companies. The subcommittee will investigate how these companies are dominating their space, and whether or not existing antitrust law is sufficient given these companies' central roles in the everyday lives of Americans.
It’s ironic, considering these companies are all competing against each other in one market or another. It’s even more ironic that, due to COVID-19, the meeting will be held over a Zoom or similar video conference call, any of which directly compete for market share in video conferencing against these very firms.
In reviewing antitrust rules, it is important to understand the system currently in place to determine whether or not a firm is acting in an anti-competitive manner.
In the United States, we determine such behavior by holding firms up to a consumer-welfare standard. This standard, brought to life in Robert Bork’s The Antitrust Paradox, seeks to “evaluate mergers and practices of businesses to determine if they harm the economic welfare of people. If they do, then regulators can step in to either prevent the merger or work out an agreement to remove the harm.” Note that the standard does not punish a business simply for being big, only for harming people’s economic welfare. And firm size is not a legitimate indicator as to whether or not consumer welfare will be jeopardized.
It has been a long time since antitrust talks have been so heated, the last major antitrust case in recent memory being against Microsoft just over 20 years ago. Microsoft was sued by a coalition of attorneys generals for bundling Internet Explorer with the Windows operating software. One of Microsoft’s competitors in browsers, Netscape, filed the complaint on the grounds that Microsoft was being anti-competitive and trying to kill the company and protect its “monopoly” of Windows. This case was monumental at the time, as Microsoft was a well-liked company and Bill Gates was held in high regard. Ultimately, Microsoft was forced to open up access to the company's software API.*
Members of Congress said then what they are saying now. Frankly, it’s discouraging how little progress Congress has made in understanding this issue.
Some have said the action against Microsoft was a net-positive, going as far as suggesting streaming services would not exist if Congress hadn’t intervened.
Even after the case was decided, IE became a powerhouse search browser, having as much as 92% share of the browser market in 2002, yet this did nothing to impede the success of Google Chrome—now the most popular default browser despite Microsoft's best attempts to regain its place. Chrome won the browser battle for the simple reason that it was the better browser.
A lot of the companies testifying to the subcommittee are extraordinarily successful because they’re highly competitive. Opponents of Google suggest it’s a monopoly because it dominates in online ad sales, but the cost for online sales is plummeting. The decrease in costs associated with advertising, coupled with the increase in exposure to consumers through online ads, empowers small businesses to have access to advertising in new and powerful ways. The decreasing cost to advertise means more businesses have the opportunity to reach consumers than ever before—that means more competition across more industries, not less.
Amazon, the online retailer, has been struggling in a highly competitive market. The coronavirus pandemic only added extra stressors, with the company losing market share to various competitors—like Shopify, Walmart, Target, and Etsy. It is disingenuous to think Amazon is being anti-competitive; they’re more competitive than ever before, doing everything in their power to retain customers.
What these companies have in common is that they all offer excellent products to consumers. Additionally, they’re constantly innovating and providing new products and services that consumers want. They should not be punished for their success. If you were to look at the Fortune 500 companies list over the past 20+ years, you would see a tremendous amount of turnover in companies represented. But this is attributable to an intense level of competition, not a lack of it. Americans deserve to have a more dynamic marketplace, and fundamentally changing antitrust laws will do more harm than good.
*Correction: This article originally stated that Microsoft was barred from bundling its browser with its operating system. We regret the error.