Why Americans Don’t Need Federal Protection from Google, Amazon, or Facebook

The Federal Trade Commission (born in 1914, fathered by Woodrow Wilson) is hosting a series of hearings and discussions on “Competition and Consumer Protection in the 21st Century,” particularly as these are affected by emerging business models in the modern high-tech economy. We at the Competitive Enterprise Institute provided a brief filing and there will be more opportunities for the public to weigh in.

Antitrust Regulation

We’ve been here before; for example, 2004 brought the FTC’s Antitrust Modernization Commission episode, analyzing similar issues but aimed broadly at antitrust as a whole, in which we also filed.

Regulation of business structure and deals in bricks and mortar didn’t and doesn’t typically make sense.

Antitrust regulation (and the term “regulation” is important to include) represents one of the largest, most visible, but widely condoned bipartisan interventions into free competitive enterprise. The implication fostered is that the federal government is automatically an impartial protector of markets rather than an impediment to that end.

We run the risk now of regulators gaining greater power and prestige as a century-old policy from the smokestack era potentially gains new strength in the age of Google, Amazon, and Facebook.

Regulation of business structure and deals in bricks and mortar didn’t and doesn’t typically make sense nor protect consumers since a look back shows prices declining and output expanding without “antitrust” law.

Regulating intangible ones and zeros from here in Washington makes even less.

The Digital Space

Just today, we saw Larry Kudlow talking about regulating Google search results (“We’ll let you know….We’re taking a look at it.”). Google is a private entity, and search results are supposed to be free speech. If you don’t like it, use another engine; the entire Internet and its underlying capabilities are all still intact underneath, crawlable as ever, unaffected by Google’s existence.

Kudlow’s trial balloon highlights an important question in contemplating FTC’s presumed contribution to consumer welfare.

Ironically, too, that the only thing that could stop Google opponents from teaming up themselves (and/or with Wall Street) and creating new search products and aggressively going after Google’s advertisers, are the antitrust laws themselves. And why not be honest? If it’s so bad, tax people for using Google and stop it directly. I’m being a little facetious, but it just shows that antitrust’s only purpose is getting unearned access to the customers (or eyeballs) that someone else has already, through effort, acquired. Government’s role instead is to leave the successful alone and allow others to take the initiative and set up “parallel universes” online, as everyone remains perfectly free to do on a non-depletable, non-exhaustible Internet. 

Kudlow’s trial balloon highlights an important question in contemplating FTC’s presumed contribution to consumer welfare and consumer protection: What are we prepared to say is “anticompetitive conduct” worthy of compulsory intervention by a federal government that itself dominates an entire economy? There is a grave contradiction at root, if you stop and think about it.

Rent-Seeking and Trustworthiness

Related to such discussions are considerations of rent-seeking and trustworthiness of agency expertise (which needs to be questioned, since errors mean grave regulatory costs to society) and prognostication given a highly lucrative antitrust bar seeing dollar signs. Worth special emphasis as the hearings proceed is implementing measures to resist antitrust’s (frequent) use as a tool of corporate welfare, and to resist unconvincing but easily exploited calls for intervention based on alleged inefficient technological lock-in or market power.

More probable than purported anti-competitive abuse on the part of private firms with merely voluntary market power is coercive regulation that precludes new, unseen, or unpredictable avenues of competitive response; or that prevents some entrepreneurs from becoming first movers at all.

Antitrust regulation’s recent rise from the not-quite-dead heralds a serious impediment to free competitive enterprise.

Geoff Manne and Joshua Wright have explained in “Innovation and the Limits of Antitrust” the high social costs that accompany antitrust intervention in poorly understood innovations and innovative business practices. To remedy the harms of intervention, they propose “simple rules that minimize error costs,” including per se legality for new product introductions; requiring direct proof of anticompetitive effects; eliminating treble damages; and per se legality for unconditional refusal to share intellectual property. In this vein, prohibiting competitor suits in predatory behavior cases is an overdue step as well to begin (thinking wishfully) putting the antitrust era in the rear-view mirror.

Entire future categories of entrepreneurship, innovation, and wealth creation are likely to be preempted or constrained by intervention in frontier sectors and the fallacy of federal expertise. Largely by design, owing to Progressivism and its commitment to centralized rather than dispersed expertise, there is widespread lack of clarity in property rights in frontier sectors, network industries, and vast global “commons” such as spectrum. These derailments of the evolution of property rights also have and continue to impose grave, irretrievable regulatory costs. It will be catastrophic for entrepreneurship and wealth creation—and consumer protection—if the federal government (and governments worldwide, since antitrust has become a global phenomenon) continue to steer, while markets merely row.

Antitrust and regulatory interventionism in the name of consumer welfare should be employed only with far more caution and skepticism, and consideration of alternatives, than exists today. Political failures outweigh alleged “market failures”; and they have to, because in reality the issue is failure to have markets. Critiques of antitrust past and present, such as our founder Fred L. Smith Jr.’s “The Case For Reforming the Antitrust Regulations (If Repeal Is Not an Option)”, capture how we continue to have the same arguments and over and over, and often conclude the same, that government intervention is not helpful to consumer welfare. Yet we keep up the intervention anyway. For some déjà vu, see our Antitrust Skeptics Bibliography.

Antitrust regulation’s recent rise from the not-quite-dead heralds a serious impediment to free competitive enterprise and entrepreneurship because of the greater damage it can do now in frontier sectors and on a global rather than national scale.

This CEI article was republished with permission.