PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Antitrust Fictions (and Actions) Will Have Real, Negative Economic Consequences

By at 18 June, 2021, 12:02 pm

by RAYMOND J. KEATING –

Thanks to myriad advancements in technology, consumers have greater access to information, news and views than ever before; entrepreneurs and small businesses have expanding opportunities to bring goods and services to the market; individuals have an abundance of ways to contact each other and to communicate their views on seemingly every topic imaginable; and competition keeps pushing entrepreneurs, small businesses and large companies to invest, innovate, improve, and serve consumers as the only means to success, to gaining market share, and to earning profits. It is, indeed, a historic and exciting time.

In fact, we should be celebrating the fact that some of the most successful technology businesses are U.S. companies. But rather than celebrating businesses like Amazon, Apple, Facebook and Google, the political class has decided to attack so-called “Big Tech.”

Benefits, Choices and Opportunity – NOT Harm

Indeed, if you listen to politicians in this crusade against so-called “Big Tech,” you’d get the impression that technology monopolies are controlling words, thoughts, and markets, with entrepreneurs, small businesses, consumers, and people of certain political stripes suffering deeply. These are the political fictions being spun to justify ramped up antitrust regulation and government control over technology firms and markets.

Consider that five pieces of legislation recently were released with bipartisan support by the Antitrust Subcommittee in the U.S. House of Representatives. In a release titled “House Lawmakers Release Anti-Monopoly Agenda for ‘A Stronger Online Economy: Opportunity, Innovation, Choice,’” overheated political rhetoric was served up in support of these legislative proposals that are disconnected from economic reality.

For example, Chairman David N. Cicilline (D-RI) declared, “Right now, unregulated tech monopolies have too much power over our economy. They are in a unique position to pick winners and losers, destroy small businesses, raise prices on consumers, and put folks out of work.”

And Subcommittee Ranking Member Ken Buck (R-CO) said, “Apple, Amazon, Facebook, and Google have prioritized power over innovation and harmed American businesses and consumers in the process. These companies have maintained monopoly power in the online marketplace by using a variety of anticompetitive behaviors to stifle competition. This legislation breaks up Big Tech’s monopoly power to control what Americans see and say online, and fosters an online market that encourages innovation and provides American small businesses with a fair playing field.”

This kind of political rhetoric and disconnect from sound economics generate legislative proposals that, if imposed, would inflict serious negatives on the U.S. economy. The package of five House bills would not strengthen the online economy, or support opportunity, innovation and choice, but instead work in the opposite direction.

The “American Innovation and Choice Online Act” uses the language of stopping “discriminatory conduct,” but in effect, it would limit innovation and consumer options by having government dictate and limit business decision-making and business models for large technology firms, referred to as platforms, including limiting lines of business in which a platform would be allowed to operate, and open the door to mandating divestitures. This is about aiding, or protecting, competitors – very much an EU and dictatorial model – rather than spurring competition and innovation.

The “Platform Competition and Opportunity Act” would prohibit large technology firms from acquiring or merging with any company that government deems to be a competitor or a potential competitor at some point in the future. This kind of sledgehammer regulation would in effect ban all acquisitions or mergers by these large technology firms. Those hurt not only would be existing companies and their owners, but also entrepreneurs and startups that would have opportunities reduced and much-needed investment limited. The burden of proof also would fall upon these firms to show that they do not compete or will not compete with the company involved in the proposed merger or acquisition. Consumers would lose for a variety of reasons, including lost productivity and efficiency gains resulting from mergers and acquisitions that pass muster in the marketplace.

The “Ending Platform Monopolies Act” would prohibit platforms from owning other business lines that might provide the platform with some kind of incentive to advantage such enterprises. Dictating and limiting the lines of business that a platform could operate in would hurt innovation and competition. And small businesses likely would suffer by losing opportunities to reach the massive consumer markets provided by such platforms. Federal regulators actually would limit competition by disadvantaging entrepreneurs and small businesses. Consumers obviously would be disadvantaged accordingly.

The “Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act” would mandate that a platform provide interoperability between competing platforms and data portability on fair and nondiscriminatory terms, that is, it would have to offer competitors the functions that it uses across its own products. The incentives to compete and invest in innovation would be greatly diminished. Small businesses that use such platforms would suffer, as would consumers.

The “Merger Filing Fee Modernization Act” would increase merger fees and expand the budgets of antitrust regulatory bodies. This is simply a case of potentially destructive and politically-driven government undertakings receiving additional funding.

The Real Outcome: Less Competition and Innovation, Fewer Choices, Diminished Investment and Entrepreneurially Opportunity  

It needs to be understood that while supposedly targeting so-called “Big Tech,” these intrusive regulations and substantial costs would fall on competitors as well, thereby actually discouraging competition in technology markets. For good measure, moving ahead with his kind of hyper-antitrust regulation of tech firms lays the groundwork for doing so in other industries, such as in retail, energy, health and medical sectors, and so on. This is what Senate anti-trust crusaders hope to accomplish.

The message is clear: Beware entrepreneurs, businesses and investors if you become too successful or if you cross certain political constituencies. The government stands ready to punish you via intrusive and costly regulation.

It doesn’t matter that this entire attack on “Big Tech” is based on political fictions, as the policies would generate negative economic consequences. Political, antitrust fictions do not somehow make the fallout for entrepreneurship, investment and innovation any less real.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

News and Media Releases