Tech Lash: The Populist Abuse of Antitrust Enforcement
Story Stream
recent articles

America's large successful tech companies including Google, Facebook, Twitter, Amazon, and Apple are facing heightened scrutiny from federal and state officials. Increasingly, populists from both the left and the right are calling for the break-up and structural reorganization of America's tech companies based on misguided notion that big is bad.

In addition to a recent spate of highly partisan congressional hearings into “Big Tech” for alleged anticompetitive behavior and partisan bias in content moderation, the Department of Justice and eleven Republican attorney generals joined a lawsuit against Google claiming the search engine provider is an anti-competitive monopoly. However, the sixty-four page legal complaint fails to make the case that consumers are harmed by Google’s market dominance.

Antitrust laws have always been prone to convoluted populist thinking and abuse for political gain, but, Goldwater Institute’s Timothy Sandefur has explained that the worse abuses of antitrust law can be avoided by adhering to the “consumer welfare” standard. Sandefur writes,

“For generations, antitrust laws have been used to deprive successful and hardworking business owners of the fruits of their labor and their rights to economic liberty. In recent years, the ‘consumer welfare’ standard helped prevent those kinds of abuses and to encourage a consumer-friendly and competitive economy.”

Generally, the consumer welfare standard holds that even where anti-competitive practices can be identified, regulators and court should take no action unless it can be shown that consumers are harmed by the practice. Despite the boisterous calls of populists to wield antitrust powers against politically disfavored companies, much of antitrust enforcement is the mundane stuff of preventing corporate collusion and price fixing like the recent price fixing case against Pilgrim's Pride. 

Taking a Jackhammer to a Pin Needle

Progressives and populists would introduce an array of policy objectives into antitrust analysis, such as addressing income inequality, expanding workers’ rights, protecting failing industries, and fighting perceived bias in content moderation, rather than preventing anticompetitive practices that harm consumers. Rather than addressing these policy issues head on with narrowly-tailored legislation, some politicians are turning to antitrust laws. Populists of both the right and left understand that antitrust law provides a uniquely powerful hammer to bludgeon American companies: the power to break up consolidated corporate groups.

Attorneys General Case Against Google

The recent DOJ and attorneys general suit against Google leads with allegations that Google is a monopoly in the “market” of “general searches.” While it is true that Google has a dominant share of the American general search market, at about 87%, it should be pointed out that its two American competitors are tech giant Microsoft with its Bing search engine and the independent DuckDuckGo (not to mention search aggregators like Yahoo!). Part of the DOJ’s case is that Google gains its dominant market share because Google is the default browser on most devices including Apple or Android products. However, the reality is that consumers can easily change default browsers and search engine on their devices. The fact is that most people simply choose to use Google because they prefer it over its competitors.

Ironically, the attorneys general highlight the value consumers derive from Google’s search results: “General search engines are “one-stop shops” consumers can use to search the internet for answers to a wide range of queries. The United States has only three general search engines that crawl the internet: Google, Bing, and, to a lesser extent, privacy-focused search provider DuckDuckGo.” I am old enough a time when people would look for information on their bookshelves or a trip to a public library. Now, Google quickly delivers valuable, convenient search results and access to information for the low, low price of free – and no library late return fees! It is difficult to see the harm to consumers here.

The Department of Justice’s case also includes claims that Google is monopolistic and anti-competitive in ads. The ad business is more complex and beyond the scope of this piece. However, Alec Stapp has pointed out that the cost of ads on the internet has actually gone down by 40% over the course of the last decade. It is not readily apparent that consumers are harmed by Google’s ad business.

Freedom to Choose

The digital economy poses new challenges for antitrust regulation with the tedious minutiae of interoperability, data privacy, self-preferencing, default browsers, and bundling of gaming on platforms like Apple and GooglePlay. It is important that lawmakers learn the intricacies of digital industries and thoroughly deliberate, then seek the least disruptive legislative and policy solutions to ensure competitive markets. While the digital industry differs from the industrial economy, it remains true that antitrust laws should be limited to the purpose of preserving competition and ensuring consumer welfare.

Rather than exercising the “nuclear option” of breaking up successful tech companies, legislators and regulators should recognize the most important remedy available to consumers: the freedom to choose.

Consumers enjoy the self-help remedy of choosing their internet browser on their laptops, tablets and smart phones, general search providers, and a worldwide web of consumer search functions, gaming, entertainment, and social media communities. The fact that the majority of consumers prefer products and services from companies like Google and Amazon is by no means an indictment of those companies. In reality, the companies like Amazon and Google are more popular and trusted than the populists who claim to protect consumers.

Doug McCullough – Director of Lone Star Policy Institute (a member of the Alliance on Antitrust) and mergers & acquisition attorney at McCullough Sudan, PLLC. 

Show comments Hide Comments