Is Big So Bad? Political Competition Enforcement Threatens Consumers
Based on reports, Attorney General William Barr has decided to bring an antitrust case against tech-giant Google by the end of the month, against the advice of many of his department’s career staff. Without knowing every argument he wants to make, it’s impossible to respond specifically. But, there is one important class of people that Barr and others like him should certainly keep in mind when they pursue cases like this: consumers. And, while regulators should remain the ‘cop on the beat’ protecting against the exertion of monopoly power, ‘bigness’ alone isn’t a bad thing.
Indeed, the efficiencies generated by “big tech” provide significant benefits that could be lost if regulators ignore the effect on consumers. For example, Instagram successfully pivoted from desktop to mobile services after its acquisition. After it was purchased, Whole Foods allowed the world’s largest online retailer to pair with brick and mortar stores to facilitate the home delivery of groceries, which certainly came in handy for many families locked down on stay-at-home orders because of the pandemic. Google’s expansion from what began as a search engine has allowed users to integrate word processing, email, calendars, web browsing and a wide variety of other services into a single experience.
Of course, these expansions of service into different markets do raise issues for competition. After all, these efficiencies and the network effects present in many social media networks can make it difficult for small firms both to enter the market and to offer similar services at competitive prices. And to be clear, if Google’s conduct served to illegally retain a monopoly in a defined market, the Department of Justice should bring an antitrust claim against the company. That said, the general concerns that currently appear to be driving competition policy have merely to do with the size of these companies alone, rather than with any specific monopolistic behaviors.
This is a dangerous oversimplification because when companies—even big ones—are prohibited from competing, consumers suffer. For example, the success of a particular company on the market is often achieved precisely because the firm manages to innovate or manage its resources in such a way as to provide a better service—often at a lower price—or in a way that provides more value to the consumer. Such behaviors should be encouraged, not punished.
That is why antitrust cases entail complex market and economic analyses to examine how the supposed anti-competitive action affects competition and consumers. For this reason, it is unsurprising that an arbitrary deadline initially proposed by the Attorney General came against the wishes of career staff, as they will need adequate time to perform this vital assessment. And, judging by AG Barr’s dismissal of the staff recommendations, his race to go after big tech appears to be politically motivated, which will almost certainly have negative implications for consumer protection. Regardless of what he ultimately decides, it is critical that we don’t lose sight of the consumer welfare standard moving forward.
To this end, the Senate Antitrust Subcommittee is holding a hearing today on the Online Advertising Market, wherein Google will, once again, be specifically targeted. This hearing could be a worthwhile exploration of the state of advertising in the United States. For example, it could help to explore whether online advertising is a distinct market in which a platform can exert monopoly power and whether Google illegally maintains a monopoly said market. These are important questions for regulators to consider and we should continue to engage in the rigorous analysis of markets and competition to ensure that consumers are protected.
But, if past hearings on big tech are any indication, it could also quickly devolve into another useless “big is bad” circus. This not only does nothing to get at the heart of any legitimate issues, but it sometimes also has had the unintended effect of demonstrating how little legislators actually know about technology.
Above all else, AG Barr’s move should remind us that politics cannot drive competition policy in the United States because, while politicians may score points against a perceived political target, consumers—and everyday Americans—are the ones who will lose the game entirely. Large technology companies, like any other large companies, create significant efficiencies and provide many invaluable services to consumers in the process. In light of this, in holding their mere size against them, we do so at our own peril.