August 4, 2020

By: Andrea O’Sullivan

Tech commentators often note that political antipathy to Silicon Valley is a bipartisan affair. When it comes to antitrust, that’s not exactly true. This was especially apparent at last week’s blockbuster House Judiciary Committee hearing that featured the digital visages of the CEOs of Facebook, Google, Apple, and Amazon.

It’s not that the Republicans have any professed love for these companies. Beyond a few paeans to American capitalism and entrepreneurship, the elephants trumpeted against platform censorship and the left-learning companies’ potential to tilt elections. But they didn’t really talk about antitrust per se, much to conservative populists’ outrage. To the extent that Republicans mentioned market power, it was mostly a tactic to pivot to their non-antitrust (although not necessarily unfounded) concerns.

Contrast this to the Democrats, who came both prepared and with receipts. One after another, they grilled the executives on specific allegations of competitive wrongs. Mark Zuckerberg had to account for his Instagram acquisition, Jeff Bezos for absorbing Diapers.com. Tim Cook got the least guff, but he still had some ‘splaining to do on App Store fees. And Alphabet/Google CEO Sundar Pichai, whose company is perhaps more vulnerable to antitrust enforcement, had to defend basically everything Google does.

There was a decent amount of non-antitrust griping from the Democrats, too. And no real bombshells were dropped. But the sharpened antitrust focus of the Democrat representatives is undeniable.

Eagle-eyed observers noticed a woman seated behind House Antitrust Subcommittee Chairman David Cicilline (D-RI). This was Lina Khan, antitrust hipster extraordinaire. The paper she wrote as a Yale law student is credited with energizing the neo-Brandeisian movement to reform antitrust law. She now serves as counsel to Rep. Cicilline; no wonder he concluded the festivities with a quote from the ur-antitrust hawk himself, Supreme Court Justice Louis Brandeis.

It’s a salient one: “We may have democracy, or we may have wealth concentrated in the hands of a few, but we can’t have both.” In other words, the purpose of antitrust law should not intrinsically be economic, but rather political.

This is evident when you compare current antitrust doctrine with the neo-Brandeisian approach that seeks to dethrone it. Under the consumer welfare standard, the focus is on the final economic effects on, well, consumers. The goal is not to maintain a particular market structure or protect certain competitors. Rather, companies are punished when they abuse their market positions to raise prices or restrict output or lower quality.

The neo-Brandeisian approach would do away with the consumer welfare standard. In its place would be a market structure approach that would empower enforcers to intervene whenever a firm gets a little too big, regardless of whether or not that firm is anti-competitive or monopolistic.

As such, the Democrat line of questioning focused a lot on the tech companies’ effects on competitors moreso than consumers. It is not hard to sympathize with the stories they presented. For instance, one rep played a soundbite from an Amazon seller whose large-immigrant-family-supporting business was apparently inexplicably delisted by the platform. You can promise to look into it, as Bezos did, but how can you argue against that?

The challenge now, as it was in Brandeis’ time, is that it’s hard to craft an objective antitrust approach not guided by consumer and price effects. So “bigness” is the problem. What is the solution? Neo-Brandeisians rarely draw a clear lines. They instead call for a broader range of social factors (which often just happen to align with the progressive agenda) to be considered in antitrust proceedings.

This is why adherents to the consumer welfare standard warn that a departure from this approach heralds another era of politicization in market oversight. Some neo-Brandeisians proudly admit this, touting intentions to wield antitrust enforcement to “create a more equitable society”—or at least what they consider to be a more equitable society. Markets, like everything else in life these days, are “inherently political” to these antitrust activists. And they wish to be empowered to decide which “different sets of beneficiaries” will prosper.

Say what you will about aggressive competition in the tech sector, it has yielded a lot of free or cheap stuff for users. (Indeed, according to some critics, this is precisely the problem.) With a more socialized antitrust regime, targeted benefits would be channeled to government-determined groups. And a lot of development—including on things that help or launch small businesses—would be stymied along the way. That’s politics.

It’s also “politics” to appeal to small businesses when advancing a new antitrust paradigm but forget them when it comes to things like lockdown policy and civil unrest. It’s “politics” to accept campaign contributions from the same companies that you castigate (on this issue, at least). And it’s “politics” to pretend that you’re not being political about it at all.

Some observers came away from the hearing thinking the consumer welfare standard escaped unscathed. I must have watched a different event. The Democrats have honed their rhetoric on exactly this target. They may not have attacked it by name. But if they are successful, the welfare of favored political constituencies will triumph over that one identity that is at least common to all Americans: the consumer.

No wonder it is hard to mount an effective rebuttal. “We all pay the same low price!” is hardly a rousing battle cry, especially in this tense climate. Add in the many grievances the outer party’s constituents harbor against Silicon Valley and you’ve got a recipe for a weird, unfocused, and largely ineffectual spectacle. Republicans can’t bring themselves to clearly commit to defend what is arguably the biggest policy victory of movement conservativism: the adoption of economic analysis by the court system.

Earnest watchers who hope that this rediscovered wellspring of antitrust reform can spark a return to a more localist Americana they may have only glimpsed secondhand will probably be disappointed. After all, “class reductionist” is now a slur on the left. If relief for this cohort should come, I wouldn’t expect it from neo-Brandeisian quarters.

The battle over the consumer welfare standard isn’t about the poor little billionaires at the end of the day, although our legal environment is one where they could become fabulously wealthy. Elite businessmen can and do spend a lot of money on lobbyists and lawyers to protect their interests.  They will almost certainly die fabulously wealthy either way.

It’s not even really about whether any particular big tech company is broken up, although that would bring many downsides for a lot more people than just the Bezoses and Zuckerbergs out there. The quality and price of living standards to which Americans are accustomed would slowly suffer—China is already ascendant. But this decline, too, would be managed.

What’s at stake is the dynamism of the U.S. economy. It’s something that is very difficult to build, but trivially easy to take for granted and destroy. And it looks increasingly likely to be something that the right is willing to sacrifice in a confused crusade that is simultaneously both for and against specific big businesses rather than for economic vitality per se.

The optimists in America think we can turn things around if we are allowed to build. With such radical proposed changes to antitrust laws, this call to build may become all the fainter.

ANDREA O’SULLIVAN is the Director of the Center for Technology and Innovation at the James Madison Institute in Tallahassee, Fla. Her work focuses on emerging technologies, cryptocurrency, surveillance, and the open internet.

Read more here: https://reason.com/2020/08/04/democrats-sharpen-tech-antitrust-messaging-at-historic-house-hearing/