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Misguided Crusade For Tech Antitrust Will Exacerbate Inequality

from the that's-not-how-this-should-work dept

After a week of congressional hearings following a 16-month, bipartisan investigation into competition in the digital marketplace, it’s clear Republican and Democratic congresspersons alike are skeptical of Big Tech. That’s fine—healthy, even. But that doesn’t make rewriting antitrust legislation to allow Congress to pick winners and losers in the marketplace a good idea.

A couple weeks ago, representatives on the House Committee on the Judiciary reconvened to discuss potential antitrust legislation and enforcement. Bipartisanship is usually a welcomed departure from petty politics, but last week, it may have established something far worse: consensus that antitrust laws should be rewritten to address Big Tech’s bigness. Without exception, all committee members expressed their desire to reign in the “gatekeepers,” but few considered the impact of their proposed solutions.

During the hearing, congressmen levelled bold accusations against the so-called monopolies, from anticompetitive business practices to outright bullying. The most ironic of these criticisms came from Democratic Representative Pramila Jayapal, who rightly highlighted a “nexus between inequality and antitrust law,” but erroneously attributed it to Big Tech. If limited access, higher prices, and worsening consumer experience afflict the digital marketplace, the culprit will be the committee’s antitrust actions — not technology companies.

Representative Jayapal and her ilk are pursuing antitrust reform because of their growing disdain for large technology platforms. Amazon, Apple, Google, and Facebook are too big and too powerful — that’s certainly arguable. These companies are far from perfect, but the application of antitrust law necessitates more than dissatisfaction with market dominance. Antitrust is built on the “consumer welfare standard,” which evaluates business conduct in the context of consumer harm. This standard has become controversial in recent years, but nevertheless has prevailed since 1979. It remains vitally important to ensure that consumers remain the focus of antitrust action, while simultaneously discouraging arbitrary and heavy-handed government interference in the market.

Though the committee and its witnesses highlighted many instances in which small businesses are worse off than their larger competitors, they failed to clearly identify consumer harm. Americans should not be swayed by any government offer to make some businesses more successful than others. Success should be determined by consumers and the market, not legislators on Capitol Hill.

Consumer harm is, however, a likely consequence of antitrust action. Many committee members and their witnesses expressed support for data portability mandates, which, similar to Europe’s GDPR and California’s CCPA, would require technology companies to provide users with access, copying, and transferring data capabilities. Data portability allows users to take their information from one platform and transfer it to a competing service, such as Twitter to Parler. This proposal received the most support because it’s innocuous. Unlike a telephone number, which still has value when transferred to another carrier, user data may not provide the same consumer power. For instance, if a consumer exports their data about buying preferences from Amazon, there isn’t much they can do with it. Another e-commerce platform may not be able to make use of the information, especially if it does not sell comparable merchandise. Most of these business silos will still exist, even if the digital barrier is broken down. As a result, data portability requirements will not be enough to reign in Big Tech.

Their next solution, structural separation, would pack a bigger punch, but would simultaneously exacerbate inequality. These restrictions would prohibit large tech companies from operating in adjacent lines of business and force divestment where these lines are crossed. For example, antitrust regulators are entertaining the possibility of separating Amazon’s inventory storage and delivery business from the larger corporation. This would result in higher, inaccessible prices in a time when contact-free delivery serves vulnerable populations. Breaking up Big Tech would have significant consequences for consumers, especially those who are cost-conscious.

These disastrous, unintended consequences have happened before. In 2012, to allay concerns about anti-competitive behavior from book publishers, Amazon was forced to raise the prices of its Kindle e-books. This had a real and burdensome effect, especially on young consumers. College students who struggle today to pay hundreds of dollars for their textbooks each semester were paying as little as $9.99 per book prior to antitrust enforcement..

Line of business restrictions would also hamper human rights. Suppose Facebook is mandated by antitrust legislation to unwind its recent acquisitions. Facebook would need to sell WhatsApp, the encrypted messaging app used by human rights advocates and victims of totalitarian regimes. Since WhatsApp does not generate meaningful revenue, a sell-off would mean that it could no longer benefit from Facebook’s scale and may necessitate functional changes. This could manifest in the form of a paid subscription model, which would be less accessible, or the introduction of advertisements, which would compromise security for those who desperately need it.

Antitrust will not create a fairer digital marketplace, but congressmen are still intent on using it to take down Big Tech. They’d like Americans to focus on gatekeeper power, but consumer welfare and equality are the real values on the line, and not in the way congressmen describe.

Rachel Chiu is a Young Voices contributor who writes about technology and employment policy. Her writing has been published in USA Today, The American Conservative, and elsewhere. Follow her on Twitter: @rachelhchiu.

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Comments on “Misguided Crusade For Tech Antitrust Will Exacerbate Inequality”

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166 Comments
That Anonymous Coward (profile) says:

"Antitrust is built on the “consumer welfare standard,” which evaluates business conduct in the context of consumer harm."

If only they could focus on telephones, cellular, internet access… it seems those industries are actively harming consumers even while raking in government handouts to do things they never manage to get around to.

Tech is the latest posterchild for everything that is wrong in the world, they can’t put a backdoor in the encryption, they can’t hide all the nudes, they can’t keep people from being offended so its a great whipping boy, the public is all up in arms b/c it can never be their fault. They shouldn’t have to do anything, it should be done for them & if it is not well someone needs to pay.

Thad (profile) says:

Re: Re:

If only they could focus on telephones, cellular, internet access… it seems those industries are actively harming consumers even while raking in government handouts to do things they never manage to get around to.

The consumer harm standard was introduced to protect the phone companies, so that antitrust actions like the breakup of Ma Bell wouldn’t happen again.

It’s the weak Chicago School approach to antitrust enforcement that’s been the standard since the Reagan Administration. It holds, essentially, that companies can engage in all the anticompetitive behavior they want as long as they keep their prices low.

Anonymous Coward says:

Re: Re: Re:

It’s the weak Chicago School approach to antitrust enforcement that’s been the standard since the Reagan Administration. It holds, essentially, that companies can engage in all the anticompetitive behavior they want as long as they keep their prices low.

And that’s exactly why Rachel Chiu, who works for the Koch-funded Young Voices and Cato Institute, is arguing for it. Young Voices also gets its content posted in places like the Washington Examiner, Washington Times, the RealClearEtc. Group, and the National Review. All this is is just a pro-corporate opinion piece from them that got shopped off and published on Techdirt.

That One Guy (profile) says:

It's on the tip of my tongue...

Without exception, all committee members expressed their desire to reign in the “gatekeepers,” but few considered the impact of their proposed solutions.

During the hearing, congressmen levelled bold accusations against the so-called monopolies, from anticompetitive business practices to outright bullying.

If limited access, higher prices, and worsening consumer experience afflict the digital marketplace, the culprit will be the committee’s antitrust actions — not technology companies.

I swear, there’s another industry that faces these problems in droves, one that’s spent years if not decades arguing that regulations are a terrible idea and that the free market will solve everything, an idea that’s been bought wholesale by politicians and parroted any time they get the chance to, but I just can’t remember which…

As always with this I can’t help but see it as nothing but hypocritical theater, pandering to the gullible by presenting some easy targets to beat up on with no real interest in serving the public because while you’ve got politicians ripping into tech companies about how powerful they are and how much influence they have on their own platforms/services there’s nary a peep when it comes to the companies that provide access to the tech platforms. For all the power that Amazon, Facebook and Google may have all three of them depend on the internet, so if politicians are really going to crack down on ‘monopolies’ and companies abusing their power to the detriment of the public maybe start with the industry that deals with the service that all three of those tech companies depend upon.

Anonymous Coward says:

Re: It's on the tip of my tongue...

Biden has appointed Tim Wu as an adviser on technology and competition. That’s a sign that the Biden Administration may be on a path toward antitrust against a large number of corps including Telecoms, not just Big Tech.

Between Tim Wu being a part of the Biden Adminstration, an FCC run by Dems, and the Dems in Congress, I can see antitrust getting the much-needed teeth and power it’s needed ever since Reagan and Bork fucked it up.

That One Guy (profile) says:

Re: Re: It's on the tip of my tongue...

Uhh, that entire article’s focus is on his efforts against tech companies(it literally starts with ‘Longtime tech critic Tim Wu…’), not telecom, so not sure how that really addresses my point. It does note that he apparently coined the term ‘net neutrality’, so that’s at least some indication that he might not be a big fan of telecom companies, but I’ll definitely be taking a wait and see approach to see if he’ll actually give the two industries equal treatment or if the entire focus will be on continuing the ‘drag tech through the mud, ignore telecom entirely’ trend that’s so popular currently.

This comment has been deemed funny by the community.
Anonymous Coward says:

Re: Re: Re:

"Why trust anyone. Research and make up your own mind."

Yes! Study it out, watch a youtube video, consult Q. We don’t need knowledgeable and experienced people.

For example, one could put together a semi sophisticated test/demonstration to prove the earth is flat …

Anonymous Coward says:

Re: Re: Re:2 Re:

" what makes her an expert on antitrust and Big Tech?"

I don’t know, who made that claim? Perhaps you should ask them.

Why trust an expert? How do I know they are an expert?
These things are not easy, if possible at all. It is a bit weird that some will ignore all so called experts in favor of some dude on the internet rather than spending the time to do research into who is actually trying to understand the phenomena/problem as opposed to blowing smoke and making money. Are they a sincere expert or a forked tongue devil expert?

bob says:

Antitrust foundations

While there is clearly a role for the consumer welfare standard among other criteria for antitrust enforcement, taken alone it can have an unreasonably narrow interpretation which translates into an unfortunate tendency to minimize or ignore externalities that do not have simple translations into monetary form. Minimizing "consumer harm" has come to mean "lower prices" while ignoring issues such as loss of privacy, environmental degradation, labor precarity, and the like, all experienced by consumers as harms. The unfortunate history of the telecommunications market in the U.S. serves as a particularly abysmal example of corporations claiming consumer benefit while taking actions that would (pre-1979) be textbook target for antitrust action.

This comment has been flagged by the community. Click here to show it.

Anonymous Coward says:

Re: Antitrust foundations

Rachel is a Koch employee through and through that works for Cato and writes for Koch-funded "Young Voices". Young Voices is an associate member of the State Policy Network, a web of state pressure groups that drive a right-wing agenda in statehouses nationwide. I’m not sure that Rachel actually cares about privacy, environmental degradation, labor precarity, and the like.

From a quick glance, Young Voices is also anti Net Neutrality, and would prolly let the telecoms run roughshod over consumers while laughing.

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Anonymous Coward says:

Re: Re: Antitrust foundations

So, being this same thing has been said multiple times with zero argument except an ad hominem, i will at least have to note that the right wing agenda seems to be the desire to kneecap "big tech". So let’s square that up with your claims of Chiu’s right-wing agenda to not do that very thing.

3, 2, 1, go.

Thad (profile) says:

Re: Antitrust foundations

Yes, exactly this.

I’m as wary as the next Techdirt reader of politicians who scapegoat "big tech" for society’s ills, but the market we’re in right now is the result of 40 years of antitrust enforcement (or, much more frequently, lack thereof) under the consumer harm standard. And that’s every sector, not just big tech.

This article, championing the importance of a hands-off, deregulated approach to antitrust enforcement, is wildly at odds with the dozens of articles on Techdirt bemoaning corporate mega-mergers and the high prices, poor service, limited consumer choice, and massive layoffs that inevitably result from them.

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Anonymous Coward says:

Re: Re: Antitrust foundations

The fact that the article also uses Parler of all things as an example to tout the importance of data portability for competing services… Like, I agree that Data Portability is useful, but when someone uses Parler in an example so openly, as if it’s just another social media service that hasn’t been in the news for the last couple months for some really important reasons, that should raise some eyebrows about where the author is coming from…

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Food Man Chew - Chinese restaurant says:

Re: Re: Antitrust foundations - just smoke-screen, "Thad"

This article, championing the importance of a hands-off, deregulated approach to antitrust enforcement, is wildly at odds with the dozens of articles on Techdirt bemoaning corporate mega-mergers and the high prices, poor service, limited consumer choice, and massive layoffs that inevitably result from them.

That’s just smoke-screen, "Thad", as is the concern for "inequality" in the title.

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Food Man Chew - Chinese restaurant says:

Re: Re: Re: Antitrust foundations - just smoke-screen, "Tha

Take a gander at this graphic from a "think tank" funded by Silicon Valley capital including GOOGLE:

https://copia.is/wp-content/uploads/2015/06/sponsors.png

and then re-evaluate your view of Techdirt. Also, Maz is partly funded by the "right-wing" Koch Foundation, which is overlooked and excused because it’s Maz.

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Food Man Chew - Chinese restaurant says:

Re: Re: Re: Antitrust foundations - just smoke-screen, "Tha

If anyone new here, I confirm that "Thad" is correct that this piece is an anomaly. Techdirt always favors a few corporations (Facebook, GOOGLE, Twitter) and attacks all other. This is so blatantly corporatist that several object.

Now, IS interesting to see anti-corporate sentiment pop out after I’ve been railing here for a decade that "BIG IS BAD" and solely on that basis gov’t should break up the largest corporations. It’s a new and startling twist. As the graphic above shows, Maz is a Silicon Valley shill. He doesn’t even hide it, but the fanboys have ignored it!

In a decade, I’ve never seen fanboys support my positions at all, let alone so much as do here — though don’t go far as to point up the obvious about Maz. I don’t trust them. Suddenly this ideologically uniform "tech" site just reverses? Even impugns the integrity of a writer Maz selected? … Maybe it’s because this piece is SO blatantly corporatist. We’ll see.

Mike Masnick (profile) says:

Re: Re: Antitrust foundations

This article, championing the importance of a hands-off, deregulated approach to antitrust enforcement, is wildly at odds with the dozens of articles on Techdirt bemoaning corporate mega-mergers and the high prices, poor service, limited consumer choice, and massive layoffs that inevitably result from them.

I disagree with that. Those mega mergers, in our view, do pretty clearly create consumer harm, which is what we highlight when we talk about them. I’m in favor of antitrust in those cases.

Changing the consumer welfare standard will target companies even when they are helping consumers, not harming them, and it could lead to bad results that don’t fix the actual problems they’re targeting.

So I don’t see how this article is at odds with what we’ve written elsewhere.

Anonymous Coward says:

Re: Re: Re: Antitrust foundations

I’d argue that lax antitrust based entirely around consumer welfare helps to produce consumer harm more than it does to prevent consumer harm. When corps can say one thing before a merger and then do the opposite after the merger, like AT&T saying that prices would go down after its mergers, get approval, but instead prices actually went up, it shows that the system is screwed up right now. We have what amounts to a pinky swear.

We used to trust-bust monopolies and megacorps because they were monopolies and megacorps. Then, after Ma Bell was broken up, Reagan and Bork decided to change it so that something like that would never happen again. I’d argue that we’re worse off today because of it. The consumer welfare standard was an intellectually bankrupt concept back then, and it’s an intellectually bankrupt concept now.

I fully support Jayapal and the other Dems and progressives in Congress who wish to increase the strength of antitrust back to what it was decades before.

Mike Masnick (profile) says:

Re: Re: Re:2 Antitrust foundations

I’d argue that lax antitrust based entirely around consumer welfare helps to produce consumer harm more than it does to prevent consumer harm. When corps can say one thing before a merger and then do the opposite after the merger, like AT&T saying that prices would go down after its mergers, get approval, but instead prices actually went up, it shows that the system is screwed up right now. We have what amounts to a pinky swear.

And I’d argue that in situations where that happens, you now have prima facie evidence of consumer harm, at which point you can go back after the company. Easy.

But it doesn’t change the consumer harm standard.

We used to trust-bust monopolies and megacorps because they were monopolies and megacorps. Then, after Ma Bell was broken up, Reagan and Bork decided to change it so that something like that would never happen again. I’d argue that we’re worse off today because of it. The consumer welfare standard was an intellectually bankrupt concept back then, and it’s an intellectually bankrupt concept now.

You’ve been fooled by people who rewrote the history books. Yes, Bork and Reagan shifted the standard, but they didn’t completely change it as some have made out.

I don’t deny that the DOJ/FTC should be more aggressive in stopping certain mergers, but they can still use the consumer welfare standard to do it properly. My argument is in how they view the standard, not in the standard itself. I fear that moving away from the standard could do a LOT of very real harm.

As I’ve pointed out for years, the whole focus on breaking internet companies up won’t solve any of the underlying problems. I mean, fine, whatever, spin off Instagram, but that won’t do a damn thing to fix the problems of Facebook. If you want to revolutionize antitrust to make it work for tech, you need a very, very different approach.

Glenn says:

The only tech monopolies are the ones created by the govt.: AT&T, Comcast, etc. (telecomm companies). These politicians are just jealous of the "influence" that they perceive Google, Facebook, and other tech "giants" as having that the politicians don’t have. It’s a big case of tech envy. But, frankly, the tech companies don’t have the influence to begin with. It’s the people who use them that have the influence, and being that they’re mostly tech-literate people–which the pols are not, the tech-illiterates just get more and more aggrieved about their failure to understand society.

crade (profile) says:

They like to call them gatekeepers, but no one seems to talk about what the supposed gates they are keeping are supposed to be providing access to.. You don’t need to go through any of these big tech guys to get to anything except to their own services. Closest thing I could think of might be the comments people post on their sites? It’s not like they are preventing people from getting them from elsewhere.. Are they supposed to be keeping the gate.. to the service that facebook made that people choose to use? Is it like the gate to get in the amazon store? Has anyone actually tried to justify calling them gatekeepers or they just hope it sticks and people don’t ask questions

crade (profile) says:

Re: Re: Re:

Can’t see how you would argue it’s a gate to the users themselves.. You mean like for the ad vendors? The users are real people and can be accessed in all many of ways. Unless you do something like say people like to go to disneyland so disneyland is a gate to those people, but thats backwards in my opinion.. People go to google/disneyland, it’s not google/disneyland putting up a fence around people and charging an entrance fee to ad. vendors

If you limit to only social media you could maybe says it’s a gate to the stuff those people have posted on that service, but it’s not like anyone is prevented from repeating it elsewhere, just directly accessing the particular data these guys are paying through the nose to facilitate and house..

Protocol model sounds nice, but not particularly realistic, someone has to front the infrastructure costs for storage and bandwidth, they aren’t going to be able to do it just so someone else can make a frontend so they pay none of the costs and then run less ads
But maybe I’m wrong, if someone thinks they can do it better than the current guys I’m certainly not going to stop them, nice thing is nothing is stopping them from trying.

nasch (profile) says:

Re: Re: Re: Re:

Can’t see how you would argue it’s a gate to the users themselves.. You mean like for the ad vendors? The users are real people and can be accessed in all many of ways.

Yes, but that doesn’t change the walled garden nature of the systems. The fact that a Facebook user has a mailing address, or an email address, or a Twitter handle, does not change the fact that to get to that Facebook user account, one must go through Facebook.

Protocol model sounds nice, but not particularly realistic

Mike has written a fair amount about it.

https://www.techdirt.com/articles/20190825/21540442853/protocols-not-platforms-technological-approach-to-free-speech.shtml

crade (profile) says:

Re: Re: Re:2 Re:

"The fact that a Facebook user has a mailing address, or an email address, or a Twitter handle, does not change the fact that to get to that Facebook user account, one must go through Facebook"

Yes but it’s not a walled garden over the users, it’s a walled garden over facebook. You only need to go through facebook to get to the users to the extent that you want to use their association with facebook to get to them. It’s no different from wanting to sell independent wares at disneyland. You didn’t earn that business, those people came for facebook.

"Mike has written a fair amount about it."
I’m familiar. Like I say, I don’t see it happening, but I see nothing stopping anyone from trying it and I’d be happy to be proven wrong,

Stephen T. Stone (profile) says:

Re:

Inequality = cheap labor

That equation presents an issue that no wealthy bastard has ever solved entirely in their favor: What happens to a business when the “cheap labor” can’t afford to stay in a given area for the sake of employment because living in that area is expensive and the employers refuse to pay a living wage?

Anonymous Coward says:

Re: Re: Re:

They go out of business.

  • or –
    The business complains to the politicians who then ask everyone to pitch in via their tax dollars to help the poor business earn profits because profits are where its at, the bees knees, the only thing that matters.
  • meanwhile –
    Your competitors have dominated the marketplace with quality product for just a little more because they are paying a living wage.
Anonymous Coward says:

Some of these acquisitions and mergers in "big tech" have hurt consumers though. Apple acquired the company behind the Dark Sky weather app which subsequently got depublished from the Google Play store (meaning Android users ended up losing a popular app) and made weather app development on iOS harder as the Dark Sky stuff was integrated into iOS directly.

crade (profile) says:

Re: Re:

But it sounds like nothing is preventing the market from functioning as it should. There is healthy competition in weather apps and low barrier to entry for new guys to step up and serve their needs better, so if consumers of weather apps are unhappy they will move to other companies, start new companies create pressure on apple to better meet their needs.

Antitrust is needed when the regular corrective market forces can’t work to heal those sort of bumps and bruises

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