ICYMI: Greg Ip Breaks Down The Good, The Bad, & The Ugly Of Attacks On Tech
Yesterday, Greg Ip published a piece in The Wall Street Journal outlining the impacts of public scrutiny on innovation and the industry. It can be “good, bad or downright ugly for technological progress,” he says, outlining the nuance between different types of backlash. After all, as he points out, not all tech can just be lumped together.
The Good: Investigations into the two automated vehicle crashes this month “won’t shut down progress but instead could help identify and correct flaws in the technology and thus ease the way to commercialization,” says Ip. Scrutiny in this arena helps tighten safety without inhibiting the near-universal desire for progress.
The Bad: Scrutiny of the relationship between tech platforms and user data upsets the win-win tradeoff of data for connections, targeted features and ads, and free services. Radical suggestions by critics could come with costs, Ip notes. As Catherine Tucker of MIT and her co-authors “predicted certain data protection rules would disproportionately hurt small and new firms.”
The Ugly: Political attacks on leading services are misguided, notes Ip as the President tweets against new platforms that are opting for a bite out of markets once dominated by traditional retailers. But as Ip writes, “This isn’t illegal, it’s what innovators do: attract customers with a superior or cheaper service, as Sears Roebuck Co.’s catalogs and Walmart Inc.’s superstores once did.”
See below for more information on the ugly consequences of attacks on leading tech services would have on consumers and the economy.
Former FTC Policy Director David Balto And CCIA Outside Counsel Matthew Lane: The Neo-Brandeis Movement Seeks To Expand Antitrust Without A Set Consensus Of What That Would Look Like.”The consumer welfare standard is surprisingly simple. Alleged anticompetitive activities are held to one measure: whether they lead to more consumer harm than benefit. These harms can be in the form of higher prices, lower output, reduced quality or lost innovation. The neo-Brandeisians think this standard is too limiting, because what is good for consumers could potentially be bad in some other way. But if you look closely at the neo-Brandeis movement you will see that it is surprisingly shallow in its details: all action, no plan. There is no consensus on how a new standard would work in courts. What we are left with are calls for change for change’s sake. This is not the way to build policy that needs to be as stable and forward looking as antitrust law. The impacts of enforcement can ripple out for decades and errors in either pursuing or not-pursuing cases have long-lasting effects.” (David Balto And Matthew Lane, “‘Hipster Antitrust’ Movement Is All Action, No Plan,” The Hill, 3/16/18)
Adam Smith Institute’s Rohan Shah Says Open Markets Institute’s Call For Break With The Consumer Welfare Standard Would Harm Consumers. “However, as noted by Hovenkamp in 2011, including producer welfare in an antitrust assessment can lead to some perverse results – for example, if a monopoly firm were to substantially increase its profits by raising prices to the extent that its increase in profits was far larger than the harm to consumers, incorporating producer welfare in the assessment would mean this excessive pricing behaviour would be viewed as perfectly acceptable. This seems perverse, and presumably Open Markets would be against this alternative (given their apparent dislike of firms making any profits whatsoever). However, Open Markets does not put forward any suggestions for a potential alternative approach.” (Rohan Shah, “Antitrust Doesn’t Need Reforming,” Adam Smith Institute, 3/14/18)
The Constant Threat Of Break Up Can Be Harmful For Consumers – Not Just The Company – Says Georgetown University Center For Business And Public Policy’s Larry Downes. “On the other hand, the constant threat of a forced divestiture can be disastrous for consumers and enterprise alike. IBM prevailed against multiple efforts to break it up along product lines, but was so shaken by the decades-long experience that the company became dangerously timid about future innovations, missing the shifts first to client-server and then to Internet-based computing architectures, nearly bankrupting the business.” (Larry Downes, “How More Regulation for U.S. Tech Could Backfire,” Harvard Business Review, 2/9/18)
Economist Timothy Taylor: Unnecessary Regulation Against Leading Tech Services “Could Close Off New Competitors.” “It’s not enough to rave against the size of Big Tech. It’s necessary to get specific: for example, about how public policy should view network effects or online buyer-and-seller platforms, and about the collection, use, sharing, and privacy protections for data. We certainly don’t want the current big tech companies to stifle new competition or abuse consumers. But in pushing back against the existing firms, we don’t want regulators to set rules that could close off new competitors, either.” (Timothy Taylor, “Network Effects, Big Data, And Antitrust Issues For Big Tech,” Conversable Economist, 2/13/18)
Former FTC Deputy Director Alden Abbott: Constraining Leading Technology Services Could Increase Inequality. “There is no reason to believe that limiting the size or constraining the business behavior of dominant platforms would reduce income inequality: The opposite might be the case. Restrictions on efficient scale or advertising practices could raise the cost of goods and services, bearing disproportionately on poorer and less wealthy consumers. Why is that the case? Reductions in economies of scale could reduce the ability of sales platforms such as Amazon to offer lower prices. Limitations on displays or advertising strategies by search engines such as Google could limit their ability to enhance the quality of their services and to offer bargains through affiliated sites whose advertising they feature. Employment opportunities for low-income and middle-income wage earners could also shrink. For example, Amazon might not be able to create as many new warehouse or service jobs or offer employment packages that are as good as they are today, due to reduced efficiency and profits.”(Alden Abbott, “Antitrust And The Winner-Take-All Economy,” Heritage Foundation, 1/23/18)