Tech reviews

Antitrust Bills: Technology-Company Regulation in Disguise

A worker assembles a box for delivery at the Amazon fulfillment center in Baltimore, Md., April 30, 2019. (Clodagh Kilcoyne/Reuters)

The proposals toss antitrust’s proper concern to the side and focus exclusively on the market’s biggest actors.

The battle against bona fide competition in the U.S. continues apace. A new antitrust proposal in the Senate, named the “American Innovation and Choice Online Act,” would punish the largest platforms and technology companies for conduct that has been benefiting consumers since goods began to be sold in stores. Under this bill — and its companions in the House — store brands, self-advertising, and large savings at checkout would be found to violate antitrust laws, punishable with fines of up to 15 percent of the company’s revenue. The catch: These new bills affect only seven companies, whose market capitalization is $550 billion or greater, which is the Senate bill’s statutory threshold. In other words, they are not antitrust bills at all.

More accurately, these proposals are clear regulation of the technology sector, dressed up in a trendy new outfit, aimed at harming the most productive sector of our economy and knee-capping the innovative output of the United States for the foreseeable future.

Since their inception, antitrust laws have been singularly concerned with competition — that is, until recently. The language in these bills plainly tosses that concern to the side and focuses exclusively on the market’s biggest actors. What they miss, of course, is that competitive harms can arise from many forms of company conduct — and from companies of all sizes. Indeed, even small firms are capable of colluding with rivals, blocking access to vital resources, or unfairly raising the price on niche goods.

But such proposals nevertheless insist on treating companies unequally. Should these bills be passed, Target and Walmart will be held to a dramatically different standard than Amazon, merely because of their size.

All of these companies have store brands, which they can sell for a lower price than name brands. All three heavily advertise those savings and place those goods in preferential places in their stores and on their websites. All three curate their selection of products to save customers time and headaches in finding the “right” product for them. Again, the only feature that distinguishes Amazon from the others is its size. To the drafters of these bills, the simple fact that Amazon has found greater success and is a trillion-dollar company renders all the above conduct allegedly bad. Target and Walmart, on the other hand, get a free pass.

These bills will not only cripple innovation; they will be one more nail in the United States’ coffin in the technology race against China and Europe. Consider the fact that European regulators are applauding Uncle Sam’s antitrust shift toward a regulatory system that starves innovation and competition. Should these bills be passed, the United States will no longer have the most dynamic, robust, and innovative companies on the planet.

Because the threshold is set at $550 billion, adjusted yearly for inflation, companies will do everything in their power to stay beneath it, even at the expense of innovation, growth, and employment. In doing so, they will be forced to choose whether to accept draconian fines as the “cost” of hiring additional workers, expanding consumer offerings, and investing in new technology. In short, no good deeds would go unpunished under the proposed legislation.

Consumers will be harmed by this shift in policy. No longer will store brands be offered for sale on platforms, forcing consumers to spend more money at checkout. What’s more, shipping and distribution costs will increase, since the bills extend to all offerings on a company’s site, not just physical products. This would require the likes of Amazon to treat all businesses equally, regardless of whether they decide to pay for Amazon’s expedited fulfillment services. This would give businesses a free ride on Amazon’s investment in infrastructure, facilitating two-day delivery in most cases, without paying for the service. If it is also subjected to hefty fines, what incentive does Amazon have for continuing its “Prime” delivery? In this scenario, wouldn’t it make most sense for the company to take the world back to increased delivery times and greater shipping costs?

If the United States continues down this path of crippling regulation, we will surely have a country that is as bereft of innovation as the European Union. Further, with a growing technological threat from China, the next decade will probably decide who wears the crown of world technological superpower. Without growth and profit incentives for U.S. companies investing in future technologies, and with staggering levels of regulation proposed in Congress that would limit the innovative potential of the tech sector, it’s becoming all too likely that China will be crowned king — and that the United States will join the EU as just another also-ran.

Alden Abbott is a senior research fellow with the Mercatus Center at George Mason University and formerly served as the Federal Trade Commission’s general counsel. Andrew Mercado is a research assistant with the Mercatus Center, focusing on innovation and governance.

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