STRS: Leading With American Innovation, Not Overbearing Antitrust Actions
This week’s Transatlantic Consumer Dialogue event called for EU-style antitrust reform that would undermine our country’s innovation economy and leadership. Let’s focus on the facts:
— Applying an outdated industrial approach to today’s technology sector harms the innovation economy.
— Moving away from the proven consumer welfare standard would undermine U.S. leadership in innovation.
— The U.S. is home to the world’s most innovative companies thanks to our competition-oriented policy framework.
Applying an outdated industrial approach to today’s technology sector harms the innovation economy.
The flexibility of the current U.S. antitrust systems enables courts and agencies to balance consumer welfare and innovation across different sectors, notes the Disruptive Competition Project. “The U.S.’s regulatory structure allows for the courts to be able to make decisions on unique cases and to address the distinct complexities of antitrust concerns arising in different situations. This structure showcases the flexibility of the U.S. antitrust system. The U.S. antitrust framework has proven over the past 100 years that courts and agencies can strike the right balance between protecting consumers and ensuring there is room to innovate and evolve without requiring amendments to the laws every number of years.”
Applying an industrial framework to the tech sector overlooks its dynamic capability-driven competition and would do more harm than good, reminds David J. Teece, Professor in Global Business, Berkeley Haas. “The probability that we are going to do more good than harm is incredibly low if we adopt a sort of industrial economy view of things.”
— “When I think about the strength of firms, I do not think anymore about markets and market share, I think about capabilities. If we do not start understanding these complexities about how these industries are different and just try out the same, old structures and frameworks of the past, it will unquestionably make things worse.”
Outdated industrial policy would disrupt the benefits driven by tech companies that have long powered the dynamic economic growth, highlights Ed Black, CEO Emeritus of CCIA. “Additionally, tech companies are continually reinvesting earnings into new and innovative products at impressive rates; by one count, the top five R&D spenders were all tech companies with a total investment of $76 billion. Tech services are an obvious bright spot for the economy that draconian industrial policy that picks winners and losers will only diminish.”
Misguided proposals to reverse the burden of proof undermine the pro-consumer focus of antitrust laws and contradict the American tradition that presumes innocence until proven guilty, writes Ben Sperry, Associate Director of the International Center for Law & Economics. “The HJC report’s recommendations on changing antitrust presumptions should be rejected. The harms will be felt not only by antitrust defendants, who will be much more likely to lose regardless of whether they have violated the law, but by consumers whose welfare is no longer the focus. The result is inconsistent with the American tradition that presumes innocence and the ability of people to dispose of their property as they see fit.”
Moving away from the proven consumer welfare standard would undermine U.S. leadership in innovation.
The consumer welfare standard promotes competition and innovation without risking the competitive process through ex ante regulation, highlights the Disruptive Competition Project. “[T]he consumer welfare standard, one of the internationally recognized barometers for effective competition enforcement — along with other tools such as private rights of action and agencies’ investigative process — ensures the U.S. can address harms and achieve a competitive marketplace without posing a risk to the competitive process through ex ante regulation. “
Claims that consumers are better off with higher prices and more competitors are not grounded in evidence, notes Herbert J. Hovenkamp, Professor of the University of Pennsylvania Law School. “To date, the strongest and most central claim of the neo-Brandeis movement remains untested; that is its assumption that individuals in our society would really be better off in a world characterized by higher prices but smaller firms. Everyone in society is a consumer and consumers vote mainly with their purchasing choices. The neo-Brandeisians still face the formidable task of providing evidence that most citizens believe they would be better off in a world of higher cost smaller firms selling at higher prices, their market behavior notwithstanding.”
Abandoning the consumer welfare standard puts U.S. global tech leadership at risk, enabling “regulatory imperialism” and bad-actor nations, reminds Robert D. Atkinson, President of the Information Technology and Innovation Foundation. “In this scenario, the United States either by commission or omission allows the EU model of digital governance to prevail in most parts of the world, other than China and digital bad-actor nations. By commission, the United States would support the right of the EU to enact stifling regulations and encourage companies around the world to adopt them, so they become the de facto rules. By omission, the United States does little to actively work with other nations to educate and pressure them to adopt the U.S. innovation-based model of digital regulation. Either way, the United States is isolated, and its firms face a global digital economy—one that isn’t based on open, rules-based competition and innovation, but rather on who can best manage multiple conflicting compliance regimes.”
The U.S. is home to the world’s most innovative companies thanks to our competition-oriented policy framework.
The U.S. remains the global leader in promoting innovative technology, ranked first on the Draper Innovation Index.
Venture capital investing has soared in the U.S. over the last 10 years, with deal count rising by 140% and deal value by 400%, far exceeding the EU level, notes Jan Rybnicek, Senior Fellow at the Global Antitrust Institute. “The disparity between the United States and European venture capital markets is one reason why the U.S. has consistently been home to the most innovative companies and technological development. But it also is evidence that investors view the United States as a better place to invest, in part because of its more favorable innovation climate.”