In an era of deep political divisions, no issue unifies Republicans and Democrats quite like punishing big tech. In the last twelve months, Senate Democrats and Republicans have released their own punitive proposals to reform America’s antitrust law. Additionally, Democrats in the House of Representatives just published a 450-page report on competition in digital markets that proposed reforms to “address anticompetitive conduct in digital markets; strengthen merger and monopolization enforcement; and improve the…administration of the antitrust laws.”
Following the House report, House lawmakers led by Antitrust Subcommittee Chairman David N. Cicilline (RI-01) and Antitrust Subcommittee Ranking Member Ken Buck (CO-04) introduced five bills that provide further evidence that lawmakers in Washington have abandoned the consumer welfare standard in favor of a “big is bad” approach to antitrust. In doing so, these bills show lawmakers no longer prioritize consumers but a rigid and inflexible ideology that presumes consumer welfare and big companies cannot coexist.
Washington’s focus mirrors deep public concern about the power of big tech. A July 2020 Pew Research Study found that 72% of Americans feel big tech has too much power. Accordingly, Republicans and Democrats have taken a firmer stance on big tech.
Nowhere is this clearer than in the American Choice and Innovation Online Act (ACIOA), Cicilline’s flagship proposal.If ACIOA becomes law, tech platforms would be designated as a covered platform if they had more than 500,000 monthly active users and/or had a market capitalization of $600 billion. Once designated a covered platform, tech platforms would be prohibited from self-preferencing their own products and services and prevented from using data not available to their competitors.
The parameters established for a covered platform suggest they are specifically targeted at big tech companies. The five big tech firms are presently the only ones in the United States to have a market capitalization above $600 billion. This provision alone would exclude national labor unions or pharmaceutical companies from compliance, even though they exert similar levels of control over people’s lives and American politics.
Taken with the other House bills, the ACIOArepresentsWashington’s most concerted attack on big tech and departure from the consumer welfare standard. Unlike the rigid big is bad mentality, the consumer welfare standard seeks to quantify how the behavior of large companies will affect consumers. If consumer harm is shown, through economic analyses, to occur, regulators will step in and act. If, however, the studies suggest consumers will benefit, regulators will allow the behavior to proceed. In taking this nuanced approach, antitrust enforcers at the Department of Justice and Federal Trade Commission can prioritize consumers.
One of the most concerning aspects of ACIOA is a prohibition on self-preferencing or allowing tech platforms to advertise their own products before their competitors’ products. While competitors routinely complain about companies such as Amazon and Apple self-preferencing their own products, this business practice ensures consumers are aware of the lowest-priced items on the market.
Products in the AmazonBasics range, for example, are often considerably cheaper and better quality than branded alternatives, meaning purchasing them can often result in considerable savings for consumers in both the long and short term. For example, a single Apple USB charger is priced at $26.34, while the AmazonBasics 2 pack USB charger is priced at only $17.99. For consumers, being aware of these cheaper alternatives often means their paychecks stretch further.
Another profoundly damaging aspect of ACIOA is its prohibition on large platforms using consumer data that is not available to its competitors. When shopping on Amazon or downloading Apple’s App store apps, both companies collect data on consumers. This data is then used to determine which products are in demand and how much consumers are willing to pay.
As a result of this information, they can focus on providing consumers with products they actually demand at a price they are willing to pay. If platforms are prohibited from collecting and utilizing this data, they will ultimately be unable to consistently provide consumers the goods they demand at a reasonable price point. For consumers, this means reduced access to demanded products and increased costs, as focused and efficient production means lower costs.
As the House is set to consider Ciciline’s proposals, lawmakers should remember that the focus of antitrust law should always be on consumers, not a rigid and inflexible ideology. By targeting big tech in the way ACIOA does, lawmakers will not only distort the original intent of antitrust law and enforcement, but they will show they care more about scoring political points than protecting and enhancing the welfare of the constituents they are elected to serve.
Published in The Economic Standard.