Conservatives Replace Consumer Welfare With Let's Get 'Big Tech'
(Chip Somodevilla/Pool via AP)
Conservatives Replace Consumer Welfare With Let's Get 'Big Tech'
(Chip Somodevilla/Pool via AP)
Story Stream
recent articles

In a true free market, businesses succeed or fail based on their ability to meet consumer’s needs and wants better than their competitors. Thus, businesses that remain successful will constantly try to find new ways to entice consumers away from their competitors. A rather obvious truth, however for almost 100 years, this basic truth escaped enforcers of America’s antitrust laws.

Instead of focusing on consumers, those charged with enforcing antitrust laws focused on how a business’ actions impacted “competition.”  Meaning, regulators focused on how successful businesses affected other companies for a majority of the first century.  This led them to adopt what could be called a” big is bad” approach to antitrust enforcement.

The post-World War II revival of free-market, or “classical liberal,” economics led to a scholarly challenge to the “big is bad” approach to antitrust.  The most influential critic of traditional antitrust was future Judge Robert Bork. In his classic work The Antitrust Paradox,  Bork  advocated that those responsible for enforcing antitrust laws should examine how a business’ action impacted consumer welfare to determine whether or not to bring an antitrust action against the business. Bork and other scholar’s effort bore fruit in the 1980s when the Reagan Justice Department adopted the consumer welfare standard for antitrust enforcement.

The consumer welfare standard does not just reflect the way markets actually operate. It also provides an objective way for government officials to determine whether or not business’s actions justify invoking antitrust laws. In contrast the “big is bad” standard provided no clear guidance to lawmakers, bureaucrats, and judges to determine whether or not a business was running afoul of the antitrust laws.

Unfortunately, today the consumer welfare standard is under attack. One of the leading advocates of abandoning the consumer welfare standard is Federal Trade Commission (FTC) Chair Lina Khan. Commissioner Khan, in a memo to FTC staff, called for taking a “holistic approach to identifying harms” that recognizes that “…that workers and independent businesses, in addition to consumers, can be harmed by antitrust and consumer protection violations.” In other words, pretend that business should concern themselves with the wellbeing of their competitors, even if it means forgoing opportunities to improve consumer welfare.

So-called “centrist” Democrat Sen. Amy Klobuchar (Minn.), who chairs the Antitrust Subcommittee of the Senate Judiciary Committee, is another proponent of going back to the “big is bad” standard. Sen. Klobuchar’s anti-Big Tech “American Innovation and Choice Act (S. 2992) imposes new regulations on Big Tech (and only on Big Tech) in complete disregard of the negative affects her bill will have on consumers. 

S. 2992 forbids large firms from requiring smaller firms use certain goods as a condition of access to the platform. This would prohibit Amazon from requiring business to use Amazon’s warehousing and shipping services as a condition of using the PRIME designation. This would mean Amazon could not guarantee one-or-two-day delivery, and would result in Amazon restricting the ability of third-party vendors to use the Prime designation (assuming they are not forbidden from doing so by another section of S. 2992). Either way, the bill provides a disincentive for consumers to buy non-Amazon products through PRIME.

This hurts small businesses instead of helping them.

It doesn’t stop on the left though, Klobuchar’s bill is being supported by some conservative Republican lawmakers, like Ted Cruz and Josh Hawley. These conservatives seem to want to replace the consumer welfare standard with a “what will get back at Big Tech” mentality.  Conservative anger at how some social media platforms treat those expressing conservative views is understandable, however, S. 2992 would do nothing to stop de-platforming of “unwoke” social media users. Rather, by giving leftists bureaucrat like Lina Khan more power over Big Tech, the bill may encourage these companies to de-platform even more conservatives.  

The free market is already checking Big Tech’s power. New companies are arising that are competing for consumers by offering services that are more appealing to users —similar to how Facebook displaced Myspace as the leading social media platform. Some of them market themselves to conservatives and others are just trying to figure out a more open alternative. Ironically, the biggest threat to these companies today is legislation like S. 2992, which threatens these companies with future federal regulations if they grow “too big.” Conservatives should not allow their anger at Big Tech to support weaponizing antitrust laws against businesses that displease politicians.

Norm Singleton is a senior fellow at the Market Institute. 

Show comments Hide Comments