The American Innovation and Choice Online Act (AICOA) is exemplary of a new antitrust movement that has a bias against big technology platforms. Senate proponents pushed hard for a vote during the summer session. With that now over, many are skeptical of whether 60 votes could be obtained in the Senate to pass the bill through.
There are good reasons to believe that the AICOA would not enhance economic freedom nor improve overall welfare. This is a problem, not because big tech needs more defenders, but because it would stifle competition and economic freedom.
The American Innovation and Choice Online Act targets specific companies
The AICOA, S.2992, would run counter to the rule of law because it targets specific companies by setting arbitrary definitions for the “covered platforms” that it would affect. Covered platforms are defined by size metrics in the bill, namely the number of the platform’s users and its market capitalization.
The levels chosen by the bill are found in sections 2(a)(5) – $550 billion average market capitalization or 50 million active monthly users – are clearly chosen so that only the large tech platforms like Google or Amazon will be subject to the prohibitions in the bill.
There are also explicit carve-out exemptions for telecommunications and financial services firms. This bumps up against the rule of law because the bill is not saying that the conduct is bad per se, it’s just bad when a certain group of firms do it.
Furthermore, the alleged harms of the activity prohibited by the bill are dubious. A major focus of the bill is on “self-preferencing” – preferencing one’s own products over those of other firms.
But that’s the point of a firm; they’re self-interested and always seek to gain. They are only benevolent insofar as competition forces them to offer a good deal to their customers.
Self-preferencing: is it truly anticompetitive?
Self-preferencing is held to be especially harmful in the case of the big tech platforms. Amazon, for instance, can use data from transactions on its platform to enhance its own products’ competitiveness against those of the third-party sellers it hosts on its platform. Is this truly anticompetitive, or is it using all of the available information to offer more choices to consumers?
One can sympathize with these third-party sellers. Many are small businesses that are simply seeking to eke out a living. However, the fact that Amazon has become a “critical trading partner” for them – as defined in AICOA’s section 2(a)(6) – is not because Amazon has forced them onto its platform; it’s because Amazon has offered them an opportunity to make money that did not exist before.
What about Google’s self-preferencing, i.e. algorithmic steering of consumers to its partners and preferred products through its search service? There are other search engines for consumers to use, but Google remains the strong favorite. There is indeed evidence that the most searched word on Bing (the second most widely used search engine) is “google.”
That aside, we already have antitrust laws that can be enforced against conduct that is deemed anticompetitive. This is demonstrated by the Justice Department’s suit against Google initially brought in 2020. By introducing new laws like the AICOA, legislators are attempting to get around cumbersome antitrust enforcement where the burden is on the agencies to show that the firm’s conduct is anticompetitive.
The AICOA would change the development of digital markets by shifting this initial burden of proof onto companies to show that their business practices are not anticompetitive.
What are the implications of limiting the size of companies?
Bigness isn’t bad per se. Limiting the size of a company should not be an end in itself. Such an antitrust remedy, if necessary, should be a means to an end. Yet it is not clear what end limiting the size of a company like Google or Amazon would achieve.
This demonstrates why the Consumer Welfare Standard (CWS) has been useful for antitrust practitioners and policy makers. It helped identify the end sought by antitrust: the enhancement of competition and thus welfare. Competition policy should not be employed to aid competitors. If it is, antitrust policy paradoxically inhibits the competition it is supposed to protect.
Whatever the merits of the original Antitrust laws in practice, their sponsors were interested in protecting competition. That is, the laws were established on the classically liberal belief that competitive economic forces best serve the public, innovation, and economic growth. Policy makers should not lose sight of this in their zeal to reform antitrust policy.
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This piece solely expresses the opinion of the author and not necessarily the organization as a whole. Students For Liberty is committed to facilitating a broad dialogue for liberty, representing a variety of opinions.