PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

A Beacon of Common Sense in an Otherwise Messy Senate Antitrust Hearing

By at 21 December, 2021, 11:27 am

 

“…the Platform Competition and Opportunity Act is of great concern. By severely restricting and even potentially banning the acquisition of startups by larger companies, the legislation will profoundly undermine the incentive for entrepreneurs to take the personal and financial risk of launching a new company, and short-circuit the process by which value-creating innovation helps fund the next generation of new businesses.” Bettina Hein, Founder & CEO, juli

by Raymond J. Keating –

Antitrust law is notorious for being vague and malleable. Indeed, that’s been the case since the Sherman Antitrust Act was signed into law by President Benjamin Harrison in 1890.

But as bad as antitrust law is, the current “anti-Big-Tech” fad in Congress has led to assorted misguided efforts to vastly expand antitrust regulatory powers, including switching the focus of antitrust inquiries from a more rational consumer welfare perspective to one that would further ramp up lobbying by businesses seeking government protection from market competition, invite political attacks on companies via antitrust actions, and empower bureaucrats and advocates who simply oppose large companies for being, well, large.

This messy effort was on full display at a December 15 hearing before the Subcommittee on Competition Policy, Antitrust, and Consumer Rights of the Senate Judiciary Committee.

Congressional Attacks and Criticism Lack Basic Understanding of the Marketplace

For the most part, the hearing was a feast of political attacks on large technology companies without recognition of how market share is gained in the marketplace. Discussion, and assertions, also included:

● Baseless assertions that somehow innovation in our economy is suffering due to large tech companies (which would be an amusing assertion under other circumstances).

● Embracing big government actions and intrusive regulation in response to businesses being big.

● Repeated claims of “monopoly” where no monopoly actually exists.

● Assumptions that increased regulation and antitrust intrusions in the market would have no ill consequences for entrepreneurship, investment and innovation.

Fortunately, there was at least one beacon of economic realism at this hearing, and it came from an entrepreneur.

Bettina Hein, a witness at the hearing, described herself as follows:

“I am a serial software entrepreneur who has built technology companies in both the United States and Europe. Most recently, I am the founder and CEO of juli – an artificial intelligence-powered digital health and wellness startup based in Boston, Massachusetts that helps our customers manage chronic conditions. juli is my third software company. I am also the founder of Pixability, a video advertising company also based in Boston, and co-founder of SVOX, a Switzerland-based speech technology company.”

Ms. Hein described her concerns this way:

“Acknowledging that the intention of the legislation is to address the size and influence of large technology platforms, it is my view – based on the specifics of the bill and ramifications that followed the enactment of similarly sweeping legislation – that the risk of unintended consequences of this legislation is very high, and that those unintended consequences will disproportionately impact and potentially damage the nation’s entrepreneurial ecosystem.

“Thriving entrepreneurship is critical to a strong and growing economy – and, therefore, to the post-COVID recovery. Repeated research in recent years has demonstrated that new businesses – “startups” – account disproportionately for the innovations that drive productivity growth, economic growth, and net new job creation.

“But entrepreneurship is also risky – a third of new businesses fail by their second year, half by their fifth. For fragile startups, there are three principal outcomes: fail, go public, or be acquired. Failure is the most common outcome. Many entrepreneurs dream of taking their company public, but most startups never achieve the scale that going public requires.

“Acquisition, therefore, is by far the most likely avenue for entrepreneurs and their employees to realize the value of what they have created through years of hard work and sacrifice. In a typical year, ten times as many startups are acquired as go public. According to a recent report by Silicon Valley Bank, nearly 60 percent of startups expect to be acquired.

“Importantly, acquisitions also enable startup investors to reclaim their invested capital, realize any gains, and recycle their capital into the next generation of startups, fueling the ongoing process of innovation-led economic growth and job creation.

“With these realities in mind, the Platform Competition and Opportunity Act is of great concern. By severely restricting and even potentially banning the acquisition of startups by larger companies, the legislation will profoundly undermine the incentive for entrepreneurs to take the personal and financial risk of launching a new company, and short-circuit the process by which value-creating innovation helps fund the next generation of new businesses.”

Did Ms. Hein’s testimony make a difference? Let’s hope so. It would be a matter of elected officials putting aside politics and pandering, and tuning in to business, economic and market realities.

Should we expect anything less from the U.S. Senate, which, after all, has been called “the world’s greatest deliberative body”?

Related Content:

Bill Aimed to Promote Platform Competition and Opportunity Would Harm U.S. Consumers and the Startup Ecosystem, Small Business Insider, November 19, 2021.

FTC Getting More Political, Radical and Unaccountable, Small Business Insider, December 13, 2021.

Small Businesses Would be Collateral Damage in the Senate’s New Antitrust Bill, Kerrigan Op-Ed in the OC Register, October 26, 2021.

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

 

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