Misguided Crusade For Tech Antitrust Will Exacerbate Inequality

Policy

from the that's-not-how-this-should-work dept

After a week of congressional hearings following a 16-month, bipartisan investigation into competition in the digital marketplace, it’s clear Republican and Democratic congresspersons alike are skeptical of Big Tech. That’s fine—healthy, even. But that doesn’t make rewriting antitrust legislation to allow Congress to pick winners and losers in the marketplace a good idea.

A couple weeks ago, representatives on the House Committee on the Judiciary reconvened to discuss potential antitrust legislation and enforcement. Bipartisanship is usually a welcomed departure from petty politics, but last week, it may have established something far worse: consensus that antitrust laws should be rewritten to address Big Tech’s bigness. Without exception, all committee members expressed their desire to reign in the “gatekeepers,” but few considered the impact of their proposed solutions.

During the hearing, congressmen levelled bold accusations against the so-called monopolies, from anticompetitive business practices to outright bullying. The most ironic of these criticisms came from Democratic Representative Pramila Jayapal, who rightly highlighted a “nexus between inequality and antitrust law,” but erroneously attributed it to Big Tech. If limited access, higher prices, and worsening consumer experience afflict the digital marketplace, the culprit will be the committee’s antitrust actions — not technology companies.

Representative Jayapal and her ilk are pursuing antitrust reform because of their growing disdain for large technology platforms. Amazon, Apple, Google, and Facebook are too big and too powerful — that’s certainly arguable. These companies are far from perfect, but the application of antitrust law necessitates more than dissatisfaction with market dominance. Antitrust is built on the “consumer welfare standard,” which evaluates business conduct in the context of consumer harm. This standard has become controversial in recent years, but nevertheless has prevailed since 1979. It remains vitally important to ensure that consumers remain the focus of antitrust action, while simultaneously discouraging arbitrary and heavy-handed government interference in the market.

Though the committee and its witnesses highlighted many instances in which small businesses are worse off than their larger competitors, they failed to clearly identify consumer harm. Americans should not be swayed by any government offer to make some businesses more successful than others. Success should be determined by consumers and the market, not legislators on Capitol Hill.

Consumer harm is, however, a likely consequence of antitrust action. Many committee members and their witnesses expressed support for data portability mandates, which, similar to Europe’s GDPR and California’s CCPA, would require technology companies to provide users with access, copying, and transferring data capabilities. Data portability allows users to take their information from one platform and transfer it to a competing service, such as Twitter to Parler. This proposal received the most support because it’s innocuous. Unlike a telephone number, which still has value when transferred to another carrier, user data may not provide the same consumer power. For instance, if a consumer exports their data about buying preferences from Amazon, there isn’t much they can do with it. Another e-commerce platform may not be able to make use of the information, especially if it does not sell comparable merchandise. Most of these business silos will still exist, even if the digital barrier is broken down. As a result, data portability requirements will not be enough to reign in Big Tech.

Their next solution, structural separation, would pack a bigger punch, but would simultaneously exacerbate inequality. These restrictions would prohibit large tech companies from operating in adjacent lines of business and force divestment where these lines are crossed. For example, antitrust regulators are entertaining the possibility of separating Amazon’s inventory storage and delivery business from the larger corporation. This would result in higher, inaccessible prices in a time when contact-free delivery serves vulnerable populations. Breaking up Big Tech would have significant consequences for consumers, especially those who are cost-conscious.

These disastrous, unintended consequences have happened before. In 2012, to allay concerns about anti-competitive behavior from book publishers, Amazon was forced to raise the prices of its Kindle e-books. This had a real and burdensome effect, especially on young consumers. College students who struggle today to pay hundreds of dollars for their textbooks each semester were paying as little as $9.99 per book prior to antitrust enforcement..

Line of business restrictions would also hamper human rights. Suppose Facebook is mandated by antitrust legislation to unwind its recent acquisitions. Facebook would need to sell WhatsApp, the encrypted messaging app used by human rights advocates and victims of totalitarian regimes. Since WhatsApp does not generate meaningful revenue, a sell-off would mean that it could no longer benefit from Facebook’s scale and may necessitate functional changes. This could manifest in the form of a paid subscription model, which would be less accessible, or the introduction of advertisements, which would compromise security for those who desperately need it.

Antitrust will not create a fairer digital marketplace, but congressmen are still intent on using it to take down Big Tech. They’d like Americans to focus on gatekeeper power, but consumer welfare and equality are the real values on the line, and not in the way congressmen describe.

Rachel Chiu is a Young Voices contributor who writes about technology and employment policy. Her writing has been published in USA Today, The American Conservative, and elsewhere. Follow her on Twitter: @rachelhchiu.

Filed Under: antitrust, competition, consumer welfare