SOMETIMES BIGGER IS BETTER
Reason magazine|January 2021
REPUBLICANS AND DEMOCRATS ARE WORKING TOGETHER ON AN ANTITRUST PUSH AGAINST BIG TECH. IT WILL BACKFIRE BIG-TIME.
RYAN YOUNG

MARK ZUCKERBERG WAS having one of 2020’s worst Zoom meetings. It was July 29, and one of the most influential men in the world was sitting, pale and perspiring, in a sparse white room getting attacked by members of Congress from both parties. Rep. Matt Gaetz, a Florida Republican and close ally of President Donald Trump, was scolding the Facebook CEO about the “content moderators that you employ [who] are out there disadvantaging conservative content.”

But before Zuckerberg could offer much in the way of a response, he was attacked from the left, as Rhode Island Democrat Rep. David Cicilline castigated Zuckerberg for not taking down the same content. For Cicilline, “the problem is Facebook is profiting off and amplifying disinformation that harms others because it’s profitable.”

For good measure, Rep. Jim Sensenbrenner, a Wisconsin Republican, asked Zuckerberg why Facebook temporarily took down Donald Trump Jr.’s account over a post promoting hydroxychloroquine as a COVID-19 treatment. Zuckerberg pointed out that the incident happened on Twitter.

The House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law was holding a formal hearing with the CEOs of four of the nation’s biggest technology companies as witnesses. The purpose of the hearing, as indicated by its title, was “examining the dominance of Amazon, Apple, Facebook, and Google.” It was the sixth such hearing since last June, out of a series of seven. Ostensibly, Republican and Democratic lawmakers were on opposite sides of the issue. But as the hearing went on, it became clear that although they had very different views about how big tech companies should conduct their business, they shared a conclusion that some tech firms had grown too big and too powerful—and that the federal government must intervene.

The two parties took different routes to their verdicts. The new breed of populist Republicans are mostly concerned with regulating political speech in their party’s favor. Democrats tend to be more concerned with the sheer size and power the bigger tech companies wield. But either way, as far as they were concerned, big tech was guilty as charged. And that verdict may coincide with legal consequences, as the Trump administration and state attorneys general begin to wage their own battles against the tech giants in federal courts.

On October 20, the U.S. Justice Department and a group of state A.G.s filed an antitrust lawsuit against Google alleging illegal dominance in online search and advertising. The Federal Trade Commission (FTC) will likely bring a case against Facebook before the end of the year. Amazon, Uber, Apple, and several other tech companies are all under some kind of regulatory scrutiny. Facebook dominates social media, and conservatives believe it is biased against them. Amazon is being criticized for selling self-branded products and giving them prominent virtual shelf space, even though nearly all major brick-and-mortar retailers and grocers do the same thing. Uber, the largest ride-sharing company before the pandemic, is the largest food delivery service during it. Software developers and regulators are critical of the 30 percent cut Apple typically pockets of App Store purchases.

In October, Democratic lawmakers on the House antitrust subcommittee released a report declaring that the four companies that appeared at the summer hearing were all anti-competitive in some way. “To put it simply,” the report says in its opening, “companies that once were scrappy, underdog startups that challenged the status quo have become the kinds of monopolies we last saw in the era of oil barons and railroad tycoons.”

The report’s nostalgic callback to America’s trustbusting yesteryear was not an accident: As technology companies have grown larger and more influential, so too have calls from both the left and the right to exercise more federal oversight over the platforms and services that have become the mortar of everyday life. Unfortunately, the bipartisan move to regulate is based on a series of faulty assumptions about what competition is and how markets should work. And it discounts or ignores the real consumer benefits these companies produce—often as a result of their size. Big tech has become a political target not because it has failed consumers but because it has served them too well.

PROGRESSIVE RETURN TO THE PAST

TODAY’S ANTITRUST CHAMPIONS often portray themselves as builders of a better future, one in which the vast power of big tech is tamed by government oversight. In his 2018 book The Curse of Bigness: Antitrust in the New Gilded Age (Columbia Global Reports), Columbia University law professor Timothy Wu, one of the modern antitrust movement’s loudest proponents, wrote that antitrust regulations are a way to “give humans a fighting chance against corporations.” For Wu, a backlash to the growth of companies like Facebook and Google was almost certain: “Some effort to revive the antitrust laws may be an inevitability in a nation founded on principles of anti-monopoly, equality, and decentralized power.” The key word is revive.

Wu, along with other thinkers such as his Columbia colleague Lina Khan, organizations such as the Open Markets Institute and the American Antitrust Institute, and politicians such as Sen. Elizabeth Warren (D–Mass.), are all influenced by Progressive Era Supreme Court Justice Louis Brandeis, who believed that corporations could commit antitrust violations simply by growing too large. In fact, Wu’s The Curse of Bigness takes its title from a famous essay in Brandeis’ 1914 book Other People’s Money and How the Bankers Use It, which argued that large corporations were inherently anti-competitive and “against the public interest.”

The neo-Brandeisians’ core argument is that for the last half-century, America has been doing antitrust wrong.

In the early 1900s, companies could be prosecuted for antitrust violations simply for being really, really big. Many of those companies grew by offering low prices, which was viewed as anticompetitive behavior. The war on bigness was, in a sense, a war on low prices.

Eventually, however, a group of economists, many associated with the University of Chicago, began to argue that this approach was misguided. Instead of focusing on bigness alone, antitrust should prioritize consumer welfare. Big was OK, as long as consumers benefited from it.

What today’s neo-Brandeisians want is to replace the consumer welfare standard with something more akin to the old standard, which relied heavily on discretion and therefore had a lower threshold for enforcement. Rulings were essentially based on whatever judges thought was reasonable. This discretion-based approach is one reason antitrust enforcement has changed so much over the years, despite new legislation rarely being passed. It was helped by the fact that laws such as the Sherman Act and the Federal Trade Commission Act did not define key terms like monopoly, restraint of trade, or unfair or deceptive act or practice. Regulators and judges were left to come up with their own definitions, which could vary from case to case to suit their needs.

This lack of predictability is one reason legal norms gradually shifted to the more stable consumer welfare standard, which requires proof of consumer harm.

THE GOP’S INTERNAL ANTITRUST DIVISION

THE MOST PROMINENT neo-Brandeisians hail almost entirely from the political left. Historically, at least, the right has preferred the consumer welfare standard that has prevailed in recent decades. But in recent years, the GOP has developed its own internal split. And the party is likely to become even more divided over time.

In his opening remarks at the July hearing, Sensenbrenner said that “antitrust law and the consumer welfare standard has served this country well for a century” and that “we must ensure our existing antitrust laws are primed to meet the needs of this country and its consumers.”

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