Last month, the White House released its 2020 Economic Report, together with the Annual Report of the Council of Economic Advisers (CEA). The data-driven report found that in the tech sector, success is shared between leading tech services, consumers, and startups. The evidence has never been clearer: leading tech services drive widespread competition and innovation in America. Calls for overbearing antitrust regulation could have unintended consequences, dampening this success across the board. Three vital points were raised by the White House CEA report and have since been echoed by antitrust experts:

—”Big is bad” arguments overlook the benefits that leading tech services provide to the economy and consumers. 

—Today’s digital economy provides startups and small businesses the tools they need to succeed. 

— Calls for overregulation based merely on size are misguided—and could stifle innovation.

“Big is bad” arguments overlook the benefits that leading tech services provide to the economy and consumers.

Successful tech companies arise from healthy competition and play a key role in sustaining it. “Successful companies benefit the economy and consumers, and they are not necessarily the threat to competition and economic growth that they are sometimes perceived to be. Instead, companies that achieve scale and large market share by innovating and providing their customers with value are a welcome result of healthy competition.” 

As found in the CEA report, “across-the-board” backlash against leading tech services is unwarranted. “The increasing size of many of the Nation’s largest companies and the growing importance of economies of scale has led some to hold the mistaken, simplistic view that ‘Big Is Bad.’ Though anticompetitive behavior by companies of any size should lead to investigations and specific enforcement actions against offenders, an across-the-board backlash against large companies simply because of their size is unwarranted.” 

Today’s digital economy provides startups and small businesses the tools they need to succeed. 

A wealth of new technology has enabled firms to grow and increased their consumer bases, the report finds. “In recent years, new technologies and business models have revolutionized the relationships between firms and consumers. Some of these changes, such as rapidly improving information technology, have enabled firms to grow, expanding their offerings from local markets to national ones, and from national markets to international ones.”

Data is not oil, the CEA report finds, and lack of access to data is not a barrier to entry in today’s digital economy. “However, a lack of access to data does not always deter entry. Lambrecht and Tucker (2015) observe that Airbnb, Uber, and Tinder entered markets where established firms (e.g., Expedia) had better data. They were able to succeed because of their innovative products. Lambrecht and Tucker (2015) also observe that data are nonrivalrous, in the sense that data can be shared and consumed by many users, in contrast to rivalrous goods such as food, which are consumed only once.”

Calls for overregulation based merely on size are misguided—and could stifle innovation.

Heavy-handed regulation could reduce venture capital funding and block procompetitive mergers, the CEA report notes. “Such policies could have important downsides. More aggressive standards for blocking mergers of nascent competitors would raise the likelihood that procompetitive mergers would be blocked. As discussed above, the digital economy relies heavily on innovation. If dominant platforms were routinely deterred from acquiring start-ups, such a policy could reduce venture capital funding in this segment.” 

Calls to dismantle existing antitrust laws are founded on misinterpretations and could punish firms for their success, notes the CEA report. “Calls for changing the goals of the antitrust laws are based on empirical research that misinterprets high concentration as necessarily harmful to consumers and reflective of underenforcement… concentration may be driven by economies of scale and scope that can lower costs for consumers. Also, successful firms tend to grow, and it is important that antitrust enforcement and competition policy not be used to punish firms for their competitive success. Finally, antitrust remedies may not be required, even when firms exercise market power, because monopoly profits create incentives for new competitors to enter the market—unless substantive entry barriers or anticompetitive behavior stand in their way.”