Sen. Amy Klobuchar recently held a hearing with the Senate Judiciary Committee titled “Reining in Dominant Digital Platforms: Restoring Competition to Our Digital Markets,” continuing her efforts last year to establish herself as a champion for antitrust reform. Klobuchar’s theories for reform single out designated tech platforms and focus on protecting competitors instead of competition. Reforming antitrust to focus on propping up competitors is impractical and would harm consumers.
In their opening remarks for the hearing, Klobuchar and Sen. Mike Lee focused on “dominant platforms,” a term used in previous legislation that usually refers to Alphabet, Apple, Meta, Amazon and possibly Microsoft.
The complaints outlined during the hearing encompassed children’s privacy concerns, artificial intelligence and self-preferencing. Through these diverse topics, Klobuchar continually emphasized the companies’ size and used it to justify her calls to protect consumers and small businesses.
Focusing on small businesses brings light to an intellectual debate at the heart of the tension surrounding antitrust reform — specifically, tension over the importance of the consumer welfare standard (CWS).
The CWS is a framework used in antitrust law that prioritizes maximizing consumer welfare as the goal of antitrust enforcement. This standard became the dominant approach to antitrust in the United States in the late 1970s. According to Federal Trade Commission (FTC) Commissioner Christine Wilson, who’s scheduled to step down from her role at the end of this month, agencies will usually refrain from acting unless consumers are harmed under this standard.
Many opponents of the CWS believe its use has led to increased consolidation within certain industries. The current chair of the FTC, Lina Khan, previously coauthored a paper titled Market Power and Inequality: The Antitrust Counterrevolution and Its Discontents. In it, she argued that the context within which the CWS was enacted was a marked shift from the original focus of antitrust on small competitors and consumers.
Arguments from antitrust reformers like Khan and Klobuchar, who seek to move away from the CWS, mirror the focus on small businesses that occurred during the hearing.
Efforts to broaden the framework to include competitors ignore the fundamental reality that competition is necessarily challenging to competitors, and that’s the way it should be. During the hearing, Professor Daniel Francis noted in his testimony regarding Klobuchar’s bill, the American Innovation and Choice Online Act, that the measurement for harm can either be the consumer or the competitors and not both.
The contradiction that Francis was referencing is that the desire to include competitors ignores certain realities inherent to the digital platform ecosystem: that large and small firms often form symbiotic relationships. In these cases, efforts to protect small businesses can ultimately end up harming them.
One paper published last October examined the impact of antitrust actions against Microsoft on the innovation of its competitors. While the actions increased new innovations, those innovations didn’t translate into profitability, which decreased in the competitor firms following the interventions. Part of the reduction in profitability could be attributed to many businesses’ reliance on large companies’ services. One example is the global retailer Amazon, which surpassed $500 billion in sales last year. Amazon also helps and supports almost two million third-party sellers, many of which are small and medium businesses.
Far from being exclusionary, the CWS encompasses as large a portion of the economy as possible. What the hearing failed to adequately consider is that businesses that compete with Amazon for sales may also use its services to reach consumers, meaning they are simultaneously consumers and competitors. This duality isn’t exclusive to companies like Amazon. Far from ignoring the harms of non-competitive and concentrated markets, the CWS casts as wide a net as possible when measuring potential harms from marketplace behavior.
While opponents of the CWS claim its use has caused a consolidation of the marketplace, solutions that widen the scope to include small businesses and other competitors ignore the realities of the marketplace. Antitrust laws in the U.S. aren’t beyond reproach, but any proposals to update them should at the very least be practical. Protectionism of competitors in competition policy doesn’t make sense.
Tirzah Duren is the director of tech policy at the American Consumer Institute, a nonprofit educational and research organization. You can follow her work on Twitter @ConsumerPal.