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Lambert: Proposed antitrust laws and the big four tech firms

Lambert: Proposed antitrust laws and the big four tech firms

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Last week, a congressional committee advanced several antitrust bills aimed at reining in the four Big Tech firms — Google, Amazon, Facebook and Apple. Co-sponsor Ken Buck, R-Colorado, insisted the bills are narrowly tailored to prevent anticompetitive harms. He described the bills’ approach as “a scalpel, not a chainsaw.”

In reality, four of the bills would radically restructure the tech landscape. They would also eliminate attractive offerings for consumers, entrench Big Tech incumbents, reduce data security, and squelch innovation.

The most extreme bill would ban the four companies from operating lines of business that they might favor on their platforms. Amazon, for example, couldn’t offer its Amazon Basics products, as it might elevate them over other brands. Google couldn’t operate Google Maps because it could favor its map results in web searches. There could be no Apple Music, as Apple might promote it over Spotify on iPhones.

Such a line of business restrictions would entrench dominant platforms by preventing the four firms from entering each other’s markets. Apple, for example, could never challenge Google by developing its own search engine for iPhones and iPads. Amazon couldn’t continue to offer video streaming services that compete with YouTube.

A less extreme bill would bar each of their platforms from favoring its own offerings and from discriminating among competing offering providers. That sounds sensible until you realize all the rule would preclude.

For example, the self-preferencing ban would bar Apple from preinstalling any of its own apps — weather, maps, a camera — on the iPhone. Nor could Apple install another company’s app that faced competition from rivals; that would constitute discrimination. Apple couldn’t even preinstall an app store, as doing so would discriminate against competing app stores. To avoid liability, Apple would have to prove by clear and convincing evidence that its actions would not impede rivals. That’s tough.

Self-preferencing can actually increase competition. It may allow one platform to gain a foothold in a space dominated by another, as when Google promoted its Google Shopping results to vie with Amazon.

Self-preferencing can also enable new business models that enhance consumer choice. Android quickly emerged as a cheaper competitor to Apple’s iPhone because Google, which owns the Android operating system, licensed it for free to device makers. Google did that because it was able to preference its own search engine on Android and earn revenues on mobile search ads rather than license fees. No self-preferencing, no Android.

A third bill would require tech platforms to be designed to facilitate data portability (a user’s ability to transfer data from one platform to another) and interoperability (the ability of rival platforms to interact seamlessly so that users can easily transition between them).

The major tech platforms are already working on an initiative to enable data portability and interoperability, but the House bill would wrest control of their efforts and hand it to the Federal Trade Commission. That seems unwise given the security risks involved in transferring data between platforms and designing them so they can open up to each other. The commission lacks the technical expertise — and has less economic motivation than the platforms themselves — to assure appropriate protections for users.

A fourth bill would bar each of the Big Four firms from engaging in any merger that would strengthen its market position. Because firms typically merge to reduce costs or improve their products in a way that makes them stronger competitors, this is effectively a merger ban.

The prospect of being acquired in a merger, though, spurs innovative startups. From 2008 to 2019, 90% of U.S. startup exits occurred through acquisition, and in a 2019 survey, 50% of startup executives said their company’s goal was to be bought. Banning all Big Tech acquisitions would reduce investments in startups by eliminating an attractive pay-out option for investors. And existing antitrust laws already ban mergers that are likely to reduce competition.

Buck is right that this package of antitrust bills is “not a chainsaw.” It’s far worse. Perhaps Rep. Zoe Lofgren, D-California, put it best when she described one of the bills as “a grenade.” Congress should send committee members back to the drawing board.

Thom Lambert teaches antitrust law at the University of Missouri Law School.

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