In many political quarters, large technology companies — “Big Tech” — have become a favorite punching bag. The latest example came last month when the leaders of Google, Facebook, Apple and Amazon were summoned to a virtual congressional hearing where lawmakers unveiled a laundry list of alleged transgressions. As a result, calls for new legislation aimed at restricting Big Tech’s influence have grown louder, though the details are often unclear.
Certainly, massive corporations like Google, Facebook, Apple and Amazon deserve to be scrutinized for potential anti-competitive behavior. In some instances, these platforms have adopted questionable methods to push their own products or undermine rivals; investigations continue by Congress, the Federal Trade Commission and other agencies.
But too many policymakers are eager to make up new antitrust laws to break up Big Tech without considering the ramifications for consumers and the economy. That would be a mistake. Our current regulatory architecture is suitable to check against anti-competitive behaviors.
For eight decades after the passage of the Sherman Act of 1890, the first federal law to prohibit monopolistic business practices, regulators and judges struggled to develop a coherent interpretation of vaguely written federal antitrust laws. Amid this uncertainty, a simple doctrine emerged: big is bad. Companies were sanctioned, not because their activities harmed the public, but merely because they were deemed to have grown too large. With no rigorous grounding, antitrust decisions could easily be abused to target political enemies or handicap disfavored industries.
In the 1970s, Robert Bork and economists of the Chicago School revolutionized the federal government’s approach to competition policy. The “big is bad” philosophy was eventually replaced with an empirically-driven consumer welfare standard, which focuses on whether consumers are harmed — through higher prices or decreased quality, for example — by a firm’s market power.
The consumer welfare standard has the flexibility to adapt to new market realities, like the growing dominance of digital communications and commerce, while maintaining objective principles that promote the public’s interest.
Viewed through a consumer welfare lens, the case for adding additional restrictions on Big Tech companies crumbles. For one, these platforms face intense competition, both with each other and with smaller firms. Facebook’s hegemony in social media, for example, has sharply eroded since 2015 as competitors like TikTok have attracted many of its younger users. To stay on top, today’s Big Tech firms — unlike the paradigmatic robber barons of the 19th century — massively invest in research and development to create new products and fine-tune existing features to retain a highly mobile customer base.
Moreover, economic research generally finds that large firms, due to economies of scale, are better positioned to produce at lower costs and maximize consumer benefits. This is especially true in network economies with billions of users. Indeed, many of the services we most rely on — Google Search, social media, millions of smartphone apps — are available for free. Where is the evidence that consumer welfare is being harmed?
How we resolve the current debate over antitrust policy will affect much more than just Big Tech. Weakening the consumer welfare standard — or abandoning it altogether — could have profound repercussions for industries across the U.S. economy, leaving us with fewer innovative products and higher prices. Legal scholars A. Douglas Melamed and Nicolas Petit have warned that “the proposed alternatives (to the consumer welfare standard) would make things worse — not better.”
It is reasonable to question whether the consumer welfare standard has been adequately applied to Big Tech companies, and whether some of their practices may unfairly handicap potential competitors — though, for now, the evidence for that charge is thin. What is not productive is to advocate for a return to the “big is bad” standard of more than a half-century ago, where consumer interests could be ignored to satisfy political and ideological motives.