Wall Street Journal
OPINION
REVIEW & OUTLOOK
Big Tech’s Antitrust Paradox
The legal test for antitrust is consumer benefit, not size.
By the Editorial Board
July 29, 2020
Everyone seems to hate America’s giant tech companies these days—except the hundreds of millions of people who use their products. Amid the new political and antitrust scrutiny of Big Tech, this not-so-small matter of consumer benefit should be the legal and policy watchword.
Wednesday’s House hearing with the CEOs of Amazon, Apple, Facebook and Google showed the bipartisan hostility to America’s most successful companies. Democrats say they’re too big, powerful and examples of non-union capitalist success. Republicans dislike them because the companies and their employees lean left politically and in some cases (Google, Twitter ) are thought to use algorithms to punish conservative content.
“Our founders would not bow before a king,” declared Rhode Island Democrat David Cicilline, setting the tone for the afternoon inquisition. “Nor should we bow before the emperors of the online economy.” He added that the Big Four’s dominance is “killing the small businesses, manufacturing and overall dynamism that are the engines of the American economy.”
His evidence is weaker than his rhetoric. There may be specific cases in which a giant abuses market power, such as Google in online advertising. The Justice Department and Federal Trade Commission are investigating the giants and may bring cases this year. But as the hearing showed, the companies have plenty of evidence to use in their defense.
Start with the reality that all four face ferocious competition, often from each other. Amazon is supposedly an unbeatable leviathan in retail. But the company has only about a 1% share of the overall global retail business and less than 4% in the U.S. Walmart is bigger and its online business is growing fast. In cloud computing services, Amazon faces competition from Microsoft, Google, Alibaba and more. Apple’s iTunes must contend with Spotify and Amazon Prime.
Progressive groups such as the NAACP and Common Sense Media claim that the failure of the current advertising boycott to change Facebook’s speech policies shows that the social-media site is a monopoly. But it proves the opposite. Businesses can avoid Facebook because they have other online places to reach consumers—including Amazon and Google.
Facebook is losing users to Snap and TikTok, especially among the young. Facebook tried to introduce a TikTok-like feature in 2018, known as Lasso, but it didn’t rope enough users. Facebook is attacked for buying Instagram but it invested heavily to make the photo-sharing site easy-to-use. There’s no way to know if Instagram could have become a competitor to Facebook had it remained independent. It might have become the Yahoo of search—an also-ran.
Amazon has prospered in part by becoming a marketplace for small business, not by excluding it. Some 1.7 million small and medium-sized businesses sell via Amazon, and the company says more than 200,000 had more than $100,000 in sales in 2019. Amazon eclipsed eBay as a leading small-business web venue because entrepreneurs thought it served them better. Amazon was also a lifeline for many businesses that were forced to shut their storefronts in the pandemic.
The American giants also operate in a global economy with emerging competitors, especially from China. Breaking up U.S. tech companies would be a gift to ByteDance, Alibaba, Baidu and Tencent, among others. Alibaba wants to elbow into Amazon’s data cloud business in Europe. Politicians who are fretting about China’s drive for global economic dominance should think twice before dismantling the U.S. firms that invest heavily in artificial intelligence and can compete world-wide.
Politicians talk about antitrust law as if it’s a finely tuned instrument, but it can easily backfire. A classic example is the way Amazon cajoled Barack Obama’s antitrust officials to bring a case against Apple for trying to compete in e-books. Justice won its case after the Supreme Court declined to take Apple’s appeal, but the result has been to make Amazon’s e-book dominance more secure.
Trust-busters target a market at a particular moment in time, though the digital marketplace is ever-changing. They targeted IBM’s mainframe dominance even as desktop PCs were on the verge of putting more computer power in the hands of individuals. They targeted Microsoft’s browser advantage on the desktop even as Google was creating new competition in search and Apple in devices.
In a democracy, any accumulation of wealth and power will get political scrutiny, and the tech giants are taking their turn in the dock. There are genuine concerns about political bias, the harm to journalism and democracy by Google’s use of content without compensation, and perhaps barriers to entry.
But the market usually does the best job of countering monopolies. Too often government intervention reinforces monopolies. Antitrust law since the work of Robert Bork and Yale Brozen in the 1970s has rightly focused not on size but consumer harm. The burden is on the critics of Big Tech to prove genuine damage, and then propose solutions that don’t do more harm than good.
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