Proposed New Antitrust Rules for Online Platforms Won't Benefit Consumers

Among the five bills introduced in the House as part of what would be a massive overhaul of antitrust enforcement aimed at just the largest online platforms, House Antitrust Committee Chairman David Cicilline (D-R.I.) reserved for himself the sweeping “American Choice and Innovation Online Act,” H.R. 3816. The bill seeks to ban many practices by the “covered platforms” that are not only normal in any other sector of the economy, but which also make possible many popular services that average consumers make use of every day. 

These include:

  • “Self-preferencing” - privileging the platform owner’s own products in search results or featuring them in a preferential way. Similarly, a platform would be prohibited from gathering user data that it does not also share with its competitors on the platform.

  • “Tying”  - conditioning use of the platform to the purchase or use of another of the platform owner’s services. 

  • “Discriminating” between “similarly situated competitors.”

A “covered platform” is defined as those with 50 million U.S. monthly users or 100 thousand U.S. monthly business users, a market cap net annual sales in excess of $600 billion, and which serves as a “critical trading partner” for other businesses which use the platform. This clearly aims at merely banning these practices for a handful of the biggest U.S. tech companies, Amazon, Facebook, Google, Apple, and Microsoft, but could easily be reached by other companies with online platforms over time (think the big retailers like Walmart and Target, or a company like Tesla, for example). 

Adam Kovecevich of the Chamber of Progress has compiled this excellent list of just some of the incredibly popular services and features that would seemingly become antitrust violations if the various House bills were to pass. Just these new antitrust violations in Cicilline’s bill alone would ban things like Google Maps and Youtube videos appearing in Google search results, Apple having its apps all pre-loaded on an iPhone, and Amazon offering Prime Shipping products alongside others.

Some degree of preferencing and discrimination is necessary for any online platform or search engine to be useful to consumers at all. Determining which results show up and in what order is not terribly different in concept from physical retail stores making decisions about what products to stock and where on their shelves. Retail stores frequently own their own house labels that they self-preferentially display right alongside the same products by their competitors, frequently for less cost. Physical retailers also routinely gather proprietary sales data that they use to inform their own business practices - those membership cards and apps exist for a reason.

Sam Bowman notes in Truth on the Market that self-preferencing can actually be not only pro-competitive but pro-innovation, in that it “allows platforms to compete with one another by using their strength in one market to enter a different one” and “gives firms a reason to invest in services that would otherwise be unprofitable for them.” For example, the ability for Google, Amazon, or Apple to give their own sponsored ads or products featured display on their own platforms is one of the ways they can profit and thus offer access to many of their features for free. And any of these companies featuring their own streaming, video game, search, map, or other services creates constant competition against one another as well as against upstarts, preventing anything like a true monopoly from existing in the digital economy for long.

The entire concept of these prohibitions targeting only a small handful of the largest companies in one industry because they are “critical trading partners” gets it entirely backwards. Platforms like Amazon or the app stores have become critical for many smaller competitors exactly because their creators invested heavily in first building them and then constantly maintaining and improving them, creating value for themselves and the millions of businesses and customers who use them alike.

Cicilline’s bill entirely ignores the fact that the scale of these platforms, and their ability to reap the benefits of hosting them, are what create the value that they offer to the third parties who benefit from them: the app developers, retailers small and large, and the businesses that use their ads and search functions to connect with new customers. Attempting to artificially “level the playing field” in online services by kneecapping the companies that are successful now may benefit some of their largest competitors in the short term, but will harm both the smaller businesses and the consumers who rely on the convenience that the incumbents provide. 

Supporters of the progressive, neo-Brandeisian movement to reform antitrust, for which Cicilline’s proposal is merely a shoe in the door, aren’t worried about your preferences as a consumer because their conception of a just society rewards “fairness” of outcome over quality of competition. In contrast, this is why the more objective metric of consumer welfare - which allows remedies against harms not only in terms of prices alone, but also innovation and quality - should remain the framework within which antitrust enforcers operate.