If there’s one bipartisan area of agreement in Washington right now, it is to break up Big Tech.
This emotion-driven train that hosts liberals and a few conservatives—for very different reasons—has left the station and we may know its first stop. A new bill aims to block companies like Apple, Google, Facebook, and Amazon from buying smaller companies.
While many are cheering on this runaway train, few are willing to consider the disaster at the end of the tracks for consumers.
Recently, Senator Amy Klobuchar (D-MN) introduced sweeping legislation to significantly reform U.S. antitrust law and beef up enforcement efforts to go after Big Tech companies.
Most significantly her bill, the Competition and Antitrust Law Enforcement Reform Act (CALERA), would raise the bar for mergers by shifting the burden from the government proving that a merger is anti-competitive to the merging companies proving they won’t harm competition.
The goal is to prevent future Big Tech acquisitions such as Facebook purchasing Instagram and WhatsApp or Amazon purchasing Whole Foods. Nevermind that users and consumers have benefitted from, for example, seamless photo sharing and same-day grocery delivery.
While this bill is aimed at Big Tech companies, it wouldn’t be limited to technology.
Klobuchar is the new chair of the Senate Judiciary antitrust subcommittee and she intends to go big on antitrust by adding hundreds of millions of dollars to the budgets of regulators. She noted:
You can’t take on trillion-dollar companies with Band-Aids and duct tape.
What does this mean for consumers?
Klobuchar’s efforts and other antitrust proposals, particularly from the left, would upend the current consumer welfare standard to something that is not consumer-focused.
According to the consumer welfare standard, the purpose of antitrust law is to protect consumers based on objective, economic analysis. If a firm engages in activities that raise prices, lowers outputs, reduces efficiency, or otherwise harms competition, it could be in violation of antitrust law. There must be quantifiable evidence of those harms, not just personal opinion. The size of a company as measured by revenue, assets, market cap, or other markers of “big” companies do not necessarily signal consumer harm. This is a reasonable standard focused on outcomes.
Big Tech is tremendously beneficial to consumers, small businesses, students, and voters. People enjoy more access to information than perhaps any other time through social media, employees can work remotely because of digital file-sharing services and email systems, small businesses advertise and sell products to customers worldwide through apps and social media websites, kids can be instructed from the safety and comfort of home, and voters can access all types of information about how their representatives vote or the positions they hold.
In the past, only the biggest companies could afford to purchase all of these services independently. Now, all of the above can be done at any time on a phone small enough to fit into a purse. All of that is at risk.
Innovation has spawned market competition and that has delivered services to a broader consumer base for free.
In some cases, mergers have made different services more seamless, saving consumers time and improving the overall online experience.
Jennifer Huddleston of the American Action Forum concluded about Klobuchar’s bill:
Many of the proposed changes are based on misguided assumptions that certain actions by large players are always bad and fail to recognize the impact that such changes would have on beneficial as well as harmful business transactions.
When there are instances of anticompetitive behavior, regulating agencies should absolutely investigate and hold firms accountable.
However, populist angst from either side—based on allegations of censorship from the right or criticism of not enough censorship by the left—should not be the driving factor. The results could be devastating to entrepreneurs, political groups, students, parents, and families who depend so heavily on technology.
And don’t for one moment believe that the party in power will not weaponize antitrust reforms against the other side.
Victor Menaldo of the University of Washington noted:
Antitrust policies are in danger of being politicized. And the collateral damage may be the big tech firms that brought us vastly improved search, educational possibilities, and entertainment, global social networks, and same-day delivery of groceries.
The fear is that this would open the door to even more polarization, populism, and short-term thinking. Can the country really afford more of that?
Conservatives who have always upheld the virtue of free-market solutions over the expansion of government control should not embrace these “reforms” from a principled standpoint. As scholars Joshua Wright and Jan Rybnicek wrote recently in National Affairs:
… As Ronald Reagan observed in 1964, the government rarely does anything as well or as economically as the private sector. And when the government does seek to control the economy it invariably does so through force or coercion of the people. An invitation to allow politicians and bureaucrats to use antitrust law to break up tech companies, to redesign digital products, or to moderate content for the “greater good” will end like most attempts at introducing just a little bit of liberal orthodoxy: the government’s discretion will grow and the people’s ability to check it will fade overtime until it is a figment of its former self. It is the camel’s nose under the tent.