PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Small Business and Government “Protection” in the Modern Economy

By at 6 April, 2021, 3:45 pm

by Raymond J. Keating and Karen Kerrigan-

Just in case you doubted what antitrust laws and regulations are ultimately about in the end, consider that a small coalition of business groups, according to The Wall Street Journal, is calling on government to effectively dictate what lines of commerce Amazon.com is allowed to enter, as part of a ramped up call for heavier antitrust regulation.

To be clear, once we get beyond the rhetoric of outrage, this coalition is seeking the federal government to protect their members from competition. As is the case whenever businesses come knocking at government’s door seeking more regulation, however, it doesn’t turn out well for anyone.

The Modern Economy and Competitive Pressure

There’s no doubt that small businesses face daily competitive challenges – from cross-town rivals in their local community, to larger businesses both domestic and international, and of course in the online marketplace. The shift to digital has only accelerated during the COVID-19 crisis, and small business owners have quickly embraced this shift. Those who are pragmatic, prepared and consumer-centric see new opportunities given the continuing shifts in consumer preferences and trends.

Indeed, the future is very bright for retailers and e-tailers in 2021, as it promises to be the biggest year for sales in years.

Online platforms and technology have enabled startups, and existing small businesses to “pivot” and shift more rapidly and effectively, and especially so during the pandemic. Indeed, the silver lining – and lesson – of the COVID-19 economy is that small businesses must meet customers where they are (which is increasingly online) and provide them with experiences that will keep them coming back.

Government Intrusion Undermines Innovation, Entrepreneurship and Small Business Opportunity  

As a basic reminder: Essential to free enterprise and consumer sovereignty are market competition and vibrant entrepreneurship. The effort by the business sectors pushing government protection against Amazon, if achieved for example, would undermine each of these pillars.

First, this particular coalition argues that antitrust should be focused on “preventing large corporations from amassing too much power.” Of course, that can mean just about anything, and serves as a convenient regulatory weapon against entrepreneurial businesses that have succeeded and grown large by serving consumers well.

The message to consumers is unmistakable: We don’t like what you’ve decided, so we’re going to bring down the heavy hand of government to overrule your decisions.

Second, as for competition, well, the coalition’s message is pretty clear: Let’s have far less from a big company like Amazon.com.

The group calls for “legislation to break up Amazon along business lines and establish standards of fair dealing for its online marketplace,” as well as empowering government to dictate “clear, bright-line rules that prohibit anti-competitive tactics by dominant corporations.”

Again, “anti-competitive tactics” is a slippery phrase that gets tossed around a great deal by those seeking government protection from competition, as does “fair dealing.” For good measure, the coalition calls for government limitations on all kinds of mergers.

Such steps certainly would limit competition by having government dictate what a company like Amazon (and presumably other platforms and businesses) can and cannot do, that is, limiting business models, operations and investments. Again, the consumer would be replaced as the ultimate decisionmaker in the market process by politicians, regulators, and a business’s competitors. Hmmm, has that ever worked out well? No, it hasn’t.

Third, and perhaps offering the greatest irony, these measures would undermine entrepreneurs and small businesses. Specifically, those small enterprises that benefit from doing business with Amazon (and other larger enterprises) as suppliers. Government coming in to dictate business models and decisions by Amazon – such as what lines of business the company can and cannot be in – undercuts Amazon, its partners and consumers.

The Modern Economy is All About Collaboration and Seizing Opportunity

Consider that, as noted in a recent SBE Council brief, “more than being big business pitted against small business – while making clear that competition always comes into play, thankfully, with big businesses having to compete against current, emerging and future competitors – transactions in the marketplace are by definition mutually beneficial and value-creating, including for small businesses using Amazon to sell their wares, and Facebook to market and advertise. In such instances, ‘Big Tech’ and small business function more as partners.”

Indeed, working with the largest online retailer serves as a major benefit for millions of small businesses in terms of selling and delivering products. On February 3, 2021, Amazon.com reported:

“[W]e are supporting the rapid growth of more than 1.7 million small and medium-sized businesses (SMBs) around the world that are selling their products in our store. SMBs now makeup close to 60% of the sales in our store, and they have created more than 2.2 million jobs globally as a result of selling on Amazon. In fact, SMBs from all 50 states that sell with Amazon are more than twice as likely to see 25-50% hiring growth compared to those that do not, according to research by IDC.”

Working with Amazon is a plus for all kinds of small businesses, and efforts to undermine Amazon via misguided government regulation obviously amounts to undermining the entrepreneurs and small businesses who do business with and via Amazon.

One of the many great things about the free enterprise system is that in order to succeed you need to serve others well. That is, you have to provide a good or service that consumers want or need, and you need to do so in an efficient, appealing way.

For good measure, no matter how big or small a firm is, constant work is required in terms of innovating, efficiency, and customer service. It’s not necessarily about doing what politicians, bureaucrats or one’s competitors prefer. Companies such as Amazon should not be punished for their success, but that is, in effect, what underlies this entire antitrust crusade that has been launched against companies like Amazon, Facebook, Apple and Google.

Let’s celebrate U.S. companies that succeed and become global leaders, especially understanding that they only reached such heights by serving consumers well, and they need to continue innovating and offering quality goods and services, or they will be cut down – not by government – but by the next great entrepreneurial ventures.

Raymond J. Keating is chief economist and Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.

 

News and Media Releases