Setting The Record Straight: Debates Around Tech & Antitrust Have Been Asked & Answered
As Congress and the administration consider new antitrust investigations into America’s leading technology companies, it is essential that rhetoric doesn’t get in the way of the facts. Here are three things to keep in mind:
—The consumer welfare standard is the ruler to measure antitrust.
—Consumers recognize the value leading tech services provide them and the economy as a whole.
—According to that ruler, the question of Google’s competitive behavior has been asked and answered.
The consumer welfare standard is the ruler to measure antitrust, and it remains relevant in today’s economy.
From ITIF’s Joe Kennedy: The consumer welfare standard, which guides antitrust policy, is based not only on price but also on nonprice harms like threats to innovation, long-term value, and product variety. “Specifically, it allows regulators to focus on the long-term trajectory of value and price, and take innovation effects directly into consideration. As UC Berkeley professor Carl Shapiro points out, the consumer welfare standard defines welfare broadly and encompasses nonprice aspects such as improved product variety and more rapid innovation.”
Antitrust dean Herbert Hovenkamp: Protecting rivals should not be the purpose of antitrust laws, and maximizing consumer benefits should be. “For example, Walmart is now expanding its offerings to include delivery and other services. Any time a merger or other practice reduces a firm’s costs or improves its products or services, it boosts competition by putting pressure on obsolete or less efficient rivals. But protecting these rivals should not be the purpose of the antitrust laws. Rather, the focus of antitrust laws should be on maximizing output, which benefits both consumers and workers.”
AAG for Antitrust Makan Delrahim: The consumer welfare standard is flexible to challenges posed by the digital economy. “Some critics assert that the antitrust consensus is not equipped to address competitive threats posed by new developments in technology—digital markets and platforms in particular. I don’t endorse that view.”
“[T]he bipartisan antitrust consensus is flexible to challenges posed by digital platform markets because it can incorporate the latest economic wisdom in determining whether business practices or transactions are harmful to competition and consumers.”
Consumers recognize the value leading tech services provide them and the economy as a whole.
The Bloomberg Editorial Board: Leading tech services are “pillars of the American economy” and benefit consumers greatly. “These companies shouldn’t be vilified. After all, they’re pillars of the American economy. They collectively employ almost 900,000 people. They’ve made it easier than ever to start a business. They’ve invented entirely new categories of products and services — and often charge users nothing for them. No one could argue that consumers have been harmed by [them]. Quite the opposite: They now have a bounty at their fingertips that previous generations could never have dreamed of.”
The digital economy continues to be a “bright spot” in the U.S. economy, according to the Commerce Department’s Bureau of Economic Analysis. “The updated estimates continue to show the digital economy has been a bright spot in the U.S. economy. Digital economy real value added grew at an average annual rate of 9.9 percent per year from 1998 to 2017, compared to 2.3 percent growth in the overall economy. The digital economy accounted for 6.9 percent ($1,351.3 billion) of current‐dollar gross domestic product (GDP) ($19,485.4 billion) in 2017, up from 5.9 percent in 1997. When compared with traditional U.S. industries or sectors, the digital economy ranked just below professional, scientific, and technical services, which accounted for 7.4 percent ($1,450.0 billion) of current‐dollar GDP, and just above wholesale trade, which accounted for 6.0 percent ($1,174.1 billion) of current‐dollar GDP.”
Progressive Policy Institute’s Michael Mandel finds consumers and workers benefit from the tech/telecom/ecommerce sector. “In 2018, both consumers and workers were benefiting from the tech/telecom/ecommerce sector. Consumers were getting falling prices, and workers were getting faster job growth and a bigger share of the economic pie. As digitization spread to other sectors, consumers and workers in those sectors will start sharing the fruits of faster growth. We suffer from too little innovation, not too much.”
Leading tech services remain among the most loved and trusted brands, per Morning Consult’s 2019 brand analysis. Of the top 5 companies for trust, tech claims 2 top spots; of the top 5 loved brands, tech claims 3.
The antitrust agencies have always had expansive authority to monitor the tech space, and many of the complaints about tech companies have been reviewed and properly dismissed under the consumer welfare standard.
The FTC and the Antitrust Division of the DOJ are tasked broadly with enforcement of antitrust law. The FTC has an additional consumer protection mandate.
Both demonstrate a “tremendous return” to Americans: “The FTC releases an annual report that includes measures of success like amount of consumer savings and recoupments compared to enforcement costs. The Antitrust Division keeps a report on violations that yielded fines of $10 million or more. These numbers show a tremendous return to Americans compared to amount invested in the agencies’ budgets (often measured in over 1,000%).”
Both agencies have contributed to an evolving understanding of antitrust law and consumer welfare standard. “However, antitrust law has evolved well past these initial theories. Others took the baton from Bork, and while they kept the evidence-based focus of his revolution, they expanded the idea of consumer harm to include negative impacts to quality and innovation. Indeed, the consensus view of antitrust includes a focus on harms to innovation. It’s even included in the latest revision of the FTC’s Horizontal Merger Guidelines, which states “[e]nhanced market power can also be manifested in non-price terms and conditions that adversely affect customers, including reduced product quality, reduced product variety, reduced service, or diminished innovation.” Thus, despite the erroneous claims of some who say current antitrust law is only focused on price, enforcers use the flexibility of consumer welfare to focus on non-price effects.”
CCIA’s Matt Schruers: The FTC investigation of Google Search was closed with the FTC Commissioners voting unanimously that there was not sufficient evidence. “In 2013, the FTC’s five Commissioners (three Democrats, two Republicans) voted unanimously to close a 19-month investigation of Google Search, stating ‘we have not found sufficient evidence that Google manipulates its search algorithms to unfairly disadvantage vertical websites that compete with Google-owned vertical properties.’ In doing so, the FTC concluded ‘Google adopted the design changes that the Commission investigated to improve the quality of its search results,’ and that data showed ‘that users benefited from these changes to Google’s search results.’ Contrary to EU regulators’ recent finding, the FTC reasoned that ‘changes to Google’s search algorithm could reasonably be viewed as improving the overall quality of Google’s search results.'”
“Did this overrule FTC staff recommendations? No. FTC Commissioners emphasized that the Commission’s conclusion was ‘in accord with the recommendations of the FTC’s Bureau of Competition, Bureau of Economics, and Office of General Counsel.'”
Tech journalist Kara Swisher: The recent regulatory push against tech “goes too far.” “The threat to break up the biggest companies is little more than rhetorical tech slamming that will not accomplish anything beyond making Senator Elizabeth Warren sound tough (she is tough, but not on this).”