Regulators Need to Rethink How They Approach Tech Antitrust

 

Antitrust law is supposed to protect competition, not individual competitors.

It’s no secret that Big Tech is attracting antitrust scrutiny around the world. Regulators are ready to break up and restructure prominent companies such as Google, Amazon, and Facebook over what they deem to be monopolistic behavior. But their approach appears to reveal a warped understanding of antitrust itself, focusing on size and competitors rather than on consumers. As a result, current tech-related antitrust actions intend to use regulation as a device to redistribute power and profit.

Over the past few weeks, antitrust regulators in IndiaSouth Korea, the United Kingdom, and especially the United States have levied strong accusations against the world’s largest technology companies. More often than not, their complaints always seem to come back to the profitability of small or local competitors, who have less market share because of the so-called gatekeepers. Even though 120 countries have different versions of antitrust law, the welfare of small businesses and individual competitors has emerged as a primary, if badly misguided concept of what antitrust should be meant to protect.

While, to repeat myself, antitrust law may vary from jurisdiction to jurisdiction, the principle that the prevention of competitor harm should be central to antitrust action is an unsound one. On a fundamental level, competition naturally implies rivalry and an effort to maximize efficiencies, with results that in the end will benefit consumers. Competition means competition; it follows, then, that the least efficient players are not entitled to a share of the market. If government officials choose to ignore these basic free-market principles, then they are essentially intervening in a way that comes uncomfortably close to central planning.

Taking this approach can erase the gains made by free-market competition and technological innovation. If President Biden, FTC chairwoman Lina Khan, and other regulators have their way, they will essentially find businesses “guilty” on the basis of their size and success while granting their less competitive rivals special privileges to which their relative lack of efficiency should not entitle them.

Big Tech is an easy target for antitrust accusations because it is losing the public’s favor. They are seen as monopolies that give competitors no chance to succeed or survive in the market. Yet, in reality Big Tech’s leading players must compete with one another and constantly innovate, or else that company — or a new one — will overtake them.

TikTok is a prime example of how a new entrant can displace the most popular websites and force them to innovate. Within a matter of months, both Instagram (a subsidy of Facebook) and Google’s YouTube released features to compete with TikTok’s short-form videos. But that didn’t stop TikTok from overtaking YouTube for average watch time and becoming the most downloaded app in the world.


Regulators should recenter their analysis on consumer harm, rather than the size and structure of a business. After all, big is not necessarily bad — misconduct is. As the late Judge Robert Bork noted in his seminal work The Antitrust Paradox, “antitrust should attack no practice or arrangement on the grounds that it is exclusionary or foreclosing unless deliberate predation can be proved.”

Judge Bork’s judicial philosophy and by extension the consumer-welfare standard have guided American courts for the past 30 years. It provides an objective, economic standard by which antitrust claims can be measured, as opposed to the previous practice of using competition policy for a multitude of goals, including the protection of “small dealers and worthy men.”

Antitrust law, rightly understood, rejects ideology and upholds economics. It is not a sledgehammer for politicians to make choices that are normally decided by consumers and the market.

Prioritizing competitors over competition is not what antitrust is about. Pretending that it is will make us all worse off.

Regulators Need to Rethink How They Approach Tech Antitrust Regulators Need to Rethink How They Approach Tech Antitrust Reviewed by Your Destination on October 13, 2021 Rating: 5

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