B⁠i⁠g Tech An⁠t⁠⁠i⁠⁠t⁠rus⁠t⁠ Inves⁠t⁠⁠i⁠ga⁠t⁠⁠i⁠ons Should Focus on Consumer Welfare

By: Andrea O’Sullivan / 2020



August 4, 2020

By: Andrea O’Sullivan

If congressional hearings can be entertainment, last week’s star-studded testimonies from top tech execs could be this year’s summer blockbuster. For the first time, the CEOs of Amazon, Apple, Google, and Facebook were grilled on antitrust concerns before members of the House Judiciary Committee.

Much of it was show, as various proceedings against U.S. tech titans are working their way through the Department of Justice and Federal Trade Commission. Still, the House Antitrust Subcommittee hearing at least illustrated the core concepts of competition policy under scrutiny.

There is no question that Big Tech is big — it’s right there in the name. But “being big” alone does not violate antitrust law, even if it could make a violation more likely. The question for antitrust investigators is whether a company has abused its market power to harm consumers. This is called the “consumer welfare standard,” and it has guided U.S. antitrust policy for about half a century.

This seemingly simple precept applies to a wide range of activities. Does Apple harm users by selectively charging developers a fee to list software on its app store? How about Amazon’s branded products? They may be cheaper than others on their marketplace, but does the company’s river of sales data give Amazon an unfair advantage? Most Google and Facebook users don’t pay prices at all, but their advertisers do. Do their actions harm any party to this “dual-sided market”?

These are important questions for a robust antitrust investigation. But even this small slice of the competition picture is broad and disparate. Apple’s market context is very different from Facebook’s. Why lump all four companies together in one hearing?

One reason is that tech companies make good punching bags for both parties. Democrats distrust unfiltered information flows, whereas Republicans suspect political censorship. And this exercise could be good politics: a recent Pew survey finds that only half of the country holds positive views of tech companies, down from 71% in 2015. Spectacles like last week’s hearing may seem like a great chance to rack up rousing soundbites.

This is a shame since the policy questions surrounding technology companies deserve serious consideration.

The consumer welfare standard was developed as an objective measure to protect Americans from anti-competitive conduct. Before this economics-grounded legal approach, antitrust decisions could be capricious or political. A judge with a soft spot for social justice, for instance, might use antitrust proceedings to advance that cause. But that decision could have the counterproductive effect of harming customers. The consumer welfare standard keeps the focus on price effects.

An antitrust hearing is not the venue to relitigate an election, scrutinize staff demographics, or demand that certain content be prioritized or deprioritized. These distractions not only confuse the issue, they may weaponize the process. When competition conversations become politicized, they can become a tool for reprisal.

Tech companies have disrupted many old ways of doing things. As our marketplaces evolve, the consumer welfare standard should be adapted to protect Americans consistently. But people, not political interests, must be the focus.

It is possible that antitrust investigations will reveal anti-competitive activities that have harmed American consumers; government attorneys can review internal communications that the public has not seen. From there, the courts could specify the appropriate tailored remedies.

Nevertheless, we should be wary of calls to replace our economic antitrust analysis with political standards that have little to do with competition. Not only could this harm consumers, it could turn antitrust into an unaccountable partisan weapon.

Andrea O’Sullivan is the director of the Center for Technology and Innovation at the James Madison Institute.

Read more here: