Hawley Takes the Lead in Washington's War Against Big Tech's Consumers
In an era of deep partisan gridlock on Capitol Hill, it seems cracking down on big tech by weaponizing America's antitrust law is unifying both Democrats and Republicans in a way that has not been seen in a decade. In the modern political landscape, both parties seem more interested in punishing big tech for political points than crafting antitrust legislation to prioritize consumers or facilitate a competitive marketplace.
Back in February, Senator Amy Klobuchar, the Democrat's self-appointed contemporary trust buster, introduced the Competition and Antitrust Law Enforcement Reform Act which would make mergers and acquisitions illegal if they created "an appreciable risk of materially lessening competition." The current standard set out by the Clayton Act only prohibits mergers and acquisitions if they "substantially…lessen competition, or to tend to create a monopoly." Klobuchar's bill would also prohibit mergers and acquisitions over $5 billion.
Following Senator Klobuchar's lead, Senator Josh Hawley (R-MO) also introduced an antitrust bill. However, his proposal is far more punitive and will cause far more harm to consumers who have benefited from the growth of big tech companies.
Under Senator Hawley's Trust-Busting for the Twenty-First Century Act, courts could force companies who violated the Sherman act to forfeit profits gained from anticompetitive behavior unless they can show "extraordinary good cause." This provision alone could force the most prominent companies into bankruptcy. Hawley's bill would also prohibit companies worth over $100 billion, or owned by individuals worth over $100 billion, from acquiring "directly or indirectly" another company. The bill would also prohibit mergers or acquisitions that "lessen competition in any way."
The most concerning aspect of Hawley's bill is his desire to designate certain companies as dominant digital platforms. If a company were to be designated a dominant digital platform by the Federal Trade Commission, it would be banned from acquiring other companies if the "acquisition exceeds $1,000,000." This provision could be particularly harmful to the wider tech ecosystem as small companies often seek to be brought out by larger companies. Preventing this from happening would ultimately disincentivize new start-ups that are driving innovation.
The most radical element of Hawley's bill is it would force antitrust enforcers to depart from considering the consumer welfare standard. Instead, they would have to revert to an outdated “big is bad” mentality. Under the consumer welfare standard, large corporations can exist and can acquire competitors so long as they do not harm consumer welfare. Unlike other antitrust enforcement approaches, the consumer welfare standard employs statistical analyses to explore how the merger or acquisition would affect consumers. The factors that the consumer welfare standard considers are price, output, and market efficiency. The most significant benefit of the consumer welfare standard is it prioritizes consumers and not abstract political philosophies developed almost a century ago that have no bearing in today's digital economy.
If Hawley's bill becomes law, the numerous benefits that the consumer welfare standard has provided would be lost as antitrust enforcers would be forced to follow rigid doctrine over empirical evidence.
Under Hawley's bill, several mergers and acquisitions that have generated consumer benefits for consumers would be prohibited, most notably Facebook's acquisition of WhatsApp. Shortly after acquiring WhatsApp for $19 billion in 2014, Facebook made the service free to consumers, providing millions of Americans with access to a secure messaging service at no cost. Previously, consumers were required to pay an annual subscription. Since its acquisition and shift to a free service, the number of WhatsApp users has grown to almost 70 million.
If Hawley's bill becomes law, Facebook would be prohibited from acquiring a smaller company like WhatsApp simply because of its size rather than whether the acquisition harms or benefits consumers.
Looking closely at Senator Hawley's deeply misguided bill, it is clear he and other modern trustbusters are not interested in creating a competitive marketplace that benefits consumers. Instead, they intend to create a rigid regulatory environment that relies on outdated assumptions, not reality or fact. A resounding rejection of Senator Hawley's legislation in the U.S. Senate is needed to ensure these harmful provisions do not enter any further into the political mainstream and will inflict significant and unnecessary harm on consumers.
Edward Longe is a research associate at the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on Twitter @ConsumerPal.