This week, Senator Josh Hawley (R-MO) continued his campaign against American technology companies with the introduction of the “Bust Up Big Tech Act” (S.1204). This legislation would ban certain companies from selling or promoting their own goods or services on their sites and force them to divest from online hosting. Senator Hawley’s rationale for this misguided legislation is that “woke Big Tech companies” are too powerful and Congress must “give power back to the American consumer.” However, American consumers already have the power to choose where they spend their money, and the government and politics should not attempt to punish companies that provide lower cost options for consumers. The crusade to punish successful American companies will ultimately lead to fewer options and less innovation for consumers.
It must be said that Americans do not share the vitriol for technology companies. Despite the “populist” argument made for this radical government intervention, technology companies have been instrumental in helping Americans navigate a global pandemic that resulted in lockdowns and increased social isolation. They also enjoy substantial popularity among consumers. A 2020 survey found that respondents’ views on major technology companies are overwhelmingly positive, with Amazon, Google, YouTube, Netflix, and Microsoft all with favorability ratings of 89 percent or higher. Consumers clearly do not have the same malice towards these companies as those supposedly fighting for them.
Consumer harm should remain the lodestar of antitrust action. This standard, which has guided antitrust enforcement for the last four decades, prioritizes protecting consumers and competition (not competitors). Senator Hawley’s poorly designed legislation would abandon this standard for a more subjective, “I’ll know it when I see it” approach to government intervention into the free market. The abandonment of the consumer welfare standard and a light-touch approach to antitrust has far-reaching consequences, as was recently discussed by NTU Foundation’s Josh Withrow. Mobilizing big government to punish companies for being large, successful, or involved with politics that differ from those in Washington would have a chilling effect on innovation and would have far reaching consequences for industries outside the technology industry.
The “Bust Up Big Tech Act” would also prevent online marketplaces from competing with third-party vendors on their site. The case Senator Hawley uses as an example is that Amazon would no longer be able to sell their own products on their marketplace. This does not protect competition, this is about protecting competitors. Similarly, it attempts to target a specific company for a common retail practice. Netflix, Costco, Walmart, and many other grocery and retail stores have private-label options that provide a generic lower cost option for consumers that competes directly with other brands on the shelf. Stores are able to strategically place these items to attract customers. However, this legislation would only bar online companies like Amazon from this practice despite the fact that consumers enjoy the wider variety of products and price points.
There is also a misconception that competition is lacking and must be “restored.” It’s true that some technology companies are large, but in the retail space, they also compete with brick-and-mortar stores with strong online presences like Walmart and Costco as well as online companies like Ebay and Etsy. This is a dynamic sector of the economy that continues to rapidly grow, especially in the wake of COVID-19 pandemic. Those wishing to dispense of the consumer welfare standard point to the size of certain companies as inherently bad for consumers. However, the goal of making everything smaller is overly simplistic and would not serve consumers well. Economies of scale allow for the production of lower cost products whose savings can be passed on to the consumer. A light-touch approach will allow continued growth and an output of more diversified goods and services for consumers.
Another flaw of this legislation is forcing companies to divest in online hosting and internet infrastructure. Amazon Web Services (AWS) made headlines after it booted Parler, which is marketed as a conservative free-speech alternative to Twitter, from its web hosting service. In response, some conservative lawmakers, including Senator Hawley, decried this as censorship targeting conservatives and called for antitrust enforcement against technology companies. While seeking retribution for a perceived wrong, this legislation attempts to fix a problem that does not exist. There is robust competition in the web hosting market, and targeting a company like AWS is a vindictive measure that is unlikely to improve competition or benefit consumers. It’s also worth noting that Parler found a different company to host its site and is set to reappear on the Apple App Store.
While a small vocal group of lawmakers might be upset by the business practices and content moderation policies by private companies, it is the antithesis of the American free market system to have the government intervene to force private sector compliance with a state-approved view. Consumers have greatly benefited from the innovative goods and services provided by technology companies. Private labels provide consumers with more options, and a light-touch approach has allowed the American technology sector to become the most dynamic in the world. Lawmakers should not upend growth and vindictively try to hurt American companies because the American consumer is the one who suffers from less choice, higher costs, and decreased innovation. Hopefully this open embrace of big government by conservatives remains on the fringes.