What They’re Saying: Hasty Tech Regulations Pose Risks To Consumers, Competition, And Prosperity
As D.C. tech critics propose hypothetical regulations left and right, experts are breaking through the noise to make sure policymakers know the full scope of these regulations’ implications. In particular, economists with focuses ranging from law to technology are reiterating that any regulation needs to be smart, address proven consumer harms, and avoid the collateral damage that comes with hastily-made decisions.
Careless regulation of tech services may have negative consequences for smaller rivals and stifle competition.
— Columbia University Law Professor Tim Wu: In a piece earlier this month, Wu offered competition as a genuine alternative to calls for break-up. “Competition can also create pressure to do better,” he wrote. If regulating leading tech services results in insulating them from competition, he writes, “we will have failed completely.”
— American Enterprise Institute’s Jim Pethokoukis: In March, Pethokoukis noted that regulations like GDPR, though capable of taking a bite out of leading tech services, would disproportionately impact many of their smaller rivals.
— The Copia Institute, Engine Advocacy, And Signatories: Calls against SESTA note the legislation’s disproportionate impact on startups. While reactionary regulation was targeted at certain services, signatories noted the “much wider and devastating impact on many others.”
— David Balto, Former Policy Director At FTC: In a recent Morning Consult op-ed, Balto writes, “Regulation may unintentionally hurt competition. For example, incumbents are better situated than new entrants to comply with new regulations.” He goes on to cite papers from academics James Campbell, Avi Goldfarb, Catherine Tucker, and Josh Lerner.
— Academics James Campbell, Avi Goldfarb, And Catherine Tucker: In their paper on privacy regulation and market structure, Campbell, Goldfarb, and Tucker find, “Though privacy regulation imposes costs on all firms, it is small firms and new firms that are most adversely affected.”
Impulsive, forced break-ups would have unintended consequences.
— Economist Michael R. Strain: Just last week, Strain wrote that if regulators made the “wrong moves,” they “could easily change the status quo for the worse.”
— University of Pennsylvania Law Professor Herbert Hovenkamp: As Hovenkamp argued earlier this month, “Breaking up these companies may have unintended consequences,” including the elimination of cost advantages, resulting in higher prices for consumers.
Muddled definitions – like claiming tech services are utilities in order to bypass the consumer welfare standard – only benefit dominant, true utilities.
— Harvard Law Professor Susan Crawford: Last week, Crawford noted that tech services do not provide physical, tangible networks in the U.S., and are therefore not utilities. Crawford argued people can easily disconnect from leading tech services and still live respectably. “It’s much harder to do that without basic transport, power, communications, water, and sewer services.” Because tech leaders are not physical, tangible networks and are not on the same level of necessity as ‘real’ utilities, she added, they aren’t one.
— Economist Noah Smith: Earlier this month, Smith wrote that, if calls for regulation are about data privacy, then the regulations themselves should center on data privacy – not firm break-ups. An overhaul of the definition of antitrust, he says, “is a poor tool for resolving the problems posed by the technology industry right now.”
Three common mistakes underscore the importance of understanding tech leaders’ business models before enacting reactionary regulations.
— Competition drives policy changes because switching costs are very low. Critics continue to argue that switching costs are high, despite clear data showing the opposite.
— Americans regularly switch between apps. Pew Research Center finds adults typically use at least three different social media apps.
— Competition drives policy changes because businesses have a vested interest in their ability to retain consumer interest. As SIIA’s Senior VP of Public Policy Mark MacCarthy points out, regulation would inadvertently create barriers to entry.
— Data is not a commodity, nor a permanent moat. It’s abundant, non-rivalrous, and not even valuable on its own.
— A common refrain from experts: “Data is not the new oil.” Data is non-rivalrous – as the Center for Data Innovation’s Joshua New points out, “Multiple companies can collect, share, and use the same data simultaneously. That goes for consumers, too.” This means that data-sharing is far from a zero-sum game.
— Spotify jumped Apple without data. Tinder jumped Match. Snap is growing, taking a bite out of leading tech services’ share of the digital ad space.
— The consumer welfare standard is about far more than just prices. Past antitrust actions have targeted anti-competitive behavior that stifles innovation.
—As CCIA President Ed Black wrote in March, the definition of welfare includes innovation.