Mr. President, Don't Politicize Google
President Trump’s recent criticisms of Google for bias against him have empowered fringe voices that have long demanded antitrust action against supposed “big tech” monopolies. Trump has consistently positioned himself against these firms, having attacked Amazon for allegedly taking advantage of taxpayers, and Twitter for supposed bias against conservatives. Now, he may be looking to use the Federal Trade Commission (FTC) to turn his words into action. But taking action against tech companies would undermine the American innovation and economic growth that Trump also promotes.
Trump’s Tweet attacks on Google have mainly focused on unsubstantiated claims of anti-conservative bias. But directly regulating Google’s feed would itself be a major First Amendment violation — it would be compelling a private company’s speech. As a result, any regulation would have to focus on the economic power of big tech firms. Of course, critics on the left have long hoped for this kind of regulation. And Trump’s new FTC commissioners have shown skepticism about the positive influences of big tech. The Republican Party, too, is swiftly moving in this direction. For instance, Sen. Orrin Hatch (R-UT) recently called for renewed antitrust scrutiny of Google’s practices.
The case against big tech companies relies on the unprecedented size of their user base, which has granted the major players a great deal of economic power. Online platforms are considered capable of exercising significant political power over users, curating an online experience that suits a particular agenda. As a result, skeptics claim, firms like Google need to be regulated or broken up in order to limit their corrosive impact on democracy.
But there is no evidence of Google engaging in politically motivated decisions in its search and news algorithms, and there are legitimate reasons regulators have left the company alone up to this point.
Modern U.S. antitrust policy has long been to avoid investigating companies for political reasons, instead orienting itself around what’s called the “consumer welfare standard.” The purpose of competition policy, according to this standard, is simply to protect consumers from high prices and other unfair practices, rather than to protect other producers in the market. It protects the process of competition and not specific competitors. Earlier iterations of antitrust policy, which attempted to protect smaller firms from big business and to ensure firms couldn’t wield political influence, only resulted in higher prices and less innovation.
In the last 30 years, the United States has had overwhelming success in using the consumer welfare standard. As the home of Silicon Valley, it has the highest number of high-tech firms per capita in the world. If we were to put constraints on tech companies, we’d harm consumers substantially while achieving no noticeable gain.
This is made clear by the example of the European Union, where competition policy does not follow the consumer welfare standard. Instead, EU regulators operate with vague duties to protect competition. The result is dangerous, politically motivated antitrust. Its recent decision to fine Google for repeated antitrust violations hasn’t improved competition, but rather damaged consumers’ online experiences.
Crusaders for more aggressive antitrust policy generally assume markets dominated by a few large are automatically anticompetitive. Economics, however, teaches us that a smaller number of competitors can actually result from more intense competition, not less. Instead of finding evidence that dominant firms have unfairly abused market power, we’re likely to find that concentration results from the innovations spurred by free and open competition.
In a recent policy paper from Boston University on artificial intelligence, technology policy expert James Bessen highlights that the recent rise in industry concentration is associated with investments in better internal information technology by “superstar firms,” which have made them more efficient than rivals. Firms such as Google and Amazon, as well as non-tech firms such as General Motors and Pfizer, have all developed software that improves the productivity of their workers. These firm-level productivity gains help them outcompete other businesses in their industry and become more profitable. In turn, they’re able to attract the best and brightest workers with better salaries, creating a virtuous cycle of productivity. This indicates that, in many cases, firms growing bigger is a result of their being more innovative, not an anti-competitive regulatory environment.
Innovative firms with productive employees can offer lower prices and higher quality products. Using antitrust to break apart these firms would only make them less productive — hurting both workers and consumers.
This is not to say there are no valid economic concerns regarding concentration. These innovations have yet to push productivity gains to the economy as a whole. This means that while employees at superstar firms are getting more productive, most workers are no more productive and still face stagnant wages. But these problems require a very different set of solutions from the ones antitrust can provide. Instead of penalizing productive firms, policymakers should focus on improving human capital.
The current approach being considered by President Trump and the GOP goes against over 30 years of positive U.S. experience. Reining in Google through antitrust would set a dangerous precedent. Keeping America’s innovative spirit alive requires enabling firms to compete, free from politically motivated attacks.
Ryan Khurana is the Executive Director of the Institute for Advancing Prosperity and a Technology Policy Fellow at Young Voices.