“America innovates, China imitates, Europe regulates.”
So said France’s deeply unpopular President Emmanuel Macron last year. With Europe’s economy lagging ours for nearly two decades – from a higher GDP than the United States in 2008 to only 67% of U.S. GDP today – one would think American politicians would not look to emulate the European regulatory regime that has left them so far behind.
Unfortunately, Senators Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) have just reintroduced the American Innovation and Choice Online Act, which would import European-style tech regulation to the U.S. This bill has long been a terrible idea that threatens our prosperity, and if passed would also jettison a 50-year legacy of conservative antitrust victories.
Since the Sherman Antitrust Act of 1890, and especially since the Clayton Antitrust Act of 1914, government lawyers could arbitrarily decide which companies were too big. The public interest demanded that the U.S. government break up “trusts” that were monopolizing markets to raise prices. Regardless of whether it was actually true that the likes of Standard Oil, which found innovative ways to deliver more petroleum products to market more cheaply, were conspiring to immiserate their customers mattered little.
But this created a paradox. What if a company like Google simply developed the best search engine and despite having competitors completely dominated the search engine market because they offered their product for free and virtually all consumers chose to use it? What if they were forced to start charging for Google searches to avoid accusations of underselling competitors? Breaking up Google search into smaller regional companies would not serve the public interest.
While this hypothetical is contemporary, the paradox was recognized by Judge Robert Bork in his seminal 1978 book The Antitrust Paradox. Bork worked out that the only way to apply the provisions of the Sherman and Clayton Acts in a manner that did not harm consumers while providing businesses with clear, stable, and fair standards was what he called the consumer welfare standard. If monopolists harmed consumers through higher prices or lower quality, they could be broken up. If not, judges should defer to the wisdom of the consumer in choosing his vendors. The book was a hit in legal circles and informed the 1979 Reiter v. Sonotone Corp. decision that made the consumer welfare standard binding precedent.
Though never elevated to the Supreme Court, Bork nonetheless left a legacy through his influential writings that have governed antitrust enforcement for the past five decades. Some companies do become monopolies by successfully absorbing all their competitors. With no competition, they can jack up prices, harming consumers. This is where government action is legitimate to restore consumer choice.
Of course, monopolies rarely last for very long. Unless protected by government mandate, the high prices enabled by market consolidation creates an incentive to develop new ways of getting products to consumers at lower cost. The higher the price, the more competitors stand to profit by charging slightly less or improving quality at the same price. Uber disrupting taxi cartels is an example of this. Nonetheless, the consumer welfare standard has generally served the public and the private sector well since the 1980s, and is consistent with landmark antitrust laws from the early 20th Century.
Klobuchar and Grassley would privilege the vicissitudes of government lawyers over consumer choice. AICOA overturns the consumer welfare standard in the digital sphere. It is essentially an antitrust bill of attainder: if your company grows beyond a certain market cap with more than 50 million monthly users, you are eligible for break-up. It singles out the biggest social media platforms and threatens them with destruction – unless, of course they cooperate with government in what kind of content they allow, who gets an account, and other censorious initiatives the Biden administration pursued.
Conservatives have legitimate concerns over Big Tech’s targeting of conservative speech and the creeping influence of non-economic issues in the business decisions of America’s largest companies. In reaction to this problem, a few Republicans have co-sponsored the Klobuchar bill with the hope that it will help reduce discrimination against conservative voices online.
In reality, the bill would worsen these issues by forcing targeted companies into a “mother-may-I” relationship with the federal government. The institutional Left is in universal agreement about the effects the bill will have. The Center for American Progress endorsed the bill on the grounds that it will spur “much needed improvements in content moderation and technologies.”
Whatever so-called “improvements” that the left has in mind for content moderation will certainly not work out in favor of conservatives’ free speech. If conservatives are unhappy with the status quo, just imagine Big Tech targeting conservative speech on behalf of Biden bureaucrats.
AICOA would push the U.S. towards a European-style approach, where the government picks economic winners and losers and targets politically disfavored companies with frivolous lawsuits. The European Digital Markets Act is part of the reason they are unable to keep up with American innovation or Chinese emulation. Importing DMA-style regulation and antitrust to the United States would surrender our prosperity and global competitiveness while worsening user experience and abandoning one of the great victories of the conservative legal movement to stick to big tech. Bureaucrats win, consumers lose.
For policy and political reasons alike, it seems foolish for Republicans to help Democrats ram through such a sweeping regulatory bill as the midterms approach. Pocketbook issues like generation-high inflation and skyrocketing gas prices are top of mind for American families. Maybe they should focus on getting government out of the way to lower costs before the midterms instead.
