Antitrust Bill Will Undermine Competition and Consumer Choice

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No other issue captures the public's attention currently like the perceived influence of big tech in the twenty-first-century economy. According to a survey conducted by Pew Research in October 2020, 72% of Americans believe "social media companies have too much power and influence in politics," and 47% of Americans also believe "major tech companies should be regulated by the government more than they are now."

To appease the public's appetite to rein in big tech, Democrats and Republicans in both the houses have lined up to condemn mainly Amazon, Apple, Microsoft, Facebook, and Twitter for supposedly behaving in an anti-competitive way. Beyond the finger-pointing, however, there seems to be no acknowledgement or recognition of the myriad of benefits that these companies have brought to consumers and the economy.

Among the most recent attacks on big tech is the Ending Platform Monopolies (EPM) Act. If Congress passes this bill, tech platforms with over 500,000 monthly users and/or market capitalization of over $600 billion would be prevented from owning or having a financial interest in other lines of businesses. Interestingly enough, the bill exclusively targets a few companies, currently written so that only "online platforms" are required to comply with the provisions, not other companies of similar size in other markets such as energy or pharmaceuticals.

Failure to comply with the provisions could see fines up to “30 percent of a company's total average daily revenue.” It also gives the federal government the power to "seek other appropriate relief in the United States district court." The relief could be rather drastic and amount to forced separations of big tech platforms.

While preventing tech platforms from owning other lines of business might seem like a simple solution to reigning in the power of big tech, doing so could inflict significant harm onto consumers and market competitiveness. Instead, lawmakers would be wiser to find solutions that enhance consumer choice and market competitiveness, and not the opposite.

There are also significant repercussions with prohibiting companies from owning other lines of business as it would prevent tech platforms from competing with each other. For example, under the proposed bill, Google would not be able to provide its popular Chrome browser service, and Amazon would not be able to offer its streaming services or Amazon Basics range of products to consumers. Instead, these companies would be forced to provide a narrow line of service with few opportunities to challenge each other.

Given the size of these tech platforms, acquiring new lines of business is among the primary ways they compete. Unable to build its own mobile operating system to compete with Apple, years ago, Google purchased Android for $50 million. As a result, Google was not only able to provide robust competition to Apple, but it also expanded beyond its search engine, with 129 million Americans using Android products forcing Apple to continuously innovate to maintain competitiveness.

Banning ownership of multiple lines of business would only entrench the power of incumbents and debilitate market competition. Prohibiting companies from extending beyond a narrow line of business, tech platforms would not have to fear competition from other tech platforms that could provide a better product at a lower cost.

Under this circumstance, Google would not have to fear a new search engine being created by its rivals and would thus not be incentivized to innovate and improve its search engine’s user interface or user experience. Dissatisfied consumers would not be able to switch over to another search engine and would be forced to use an unnecessarily poor service.

The introduction of the EPM Act is just another sign that legislators in Washington fail to understand the competitive nature of the tech marketplace and that the scope of antitrust law should always prioritize consumer welfare. Prohibiting tech companies from engaging in new lines of business, and thereby undermining competition and the incentive to innovate, consumers would ultimately be left with less choice and inadequate services at higher prices.

Rather than creating a punitive regulatory environment, lawmakers would be wise to craft legislation that incentivizes tech platforms to compete and innovate with each other, so that consumers are able to reap the significant benefits tech platforms can provide.

Not doing so will only represent Washington's failure to protect consumers.

Krisztina Pusok is a Director at the American Consumer Institute and Edward Longe is a Policy Manager 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.



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