(Drivebycuriosity) - America has a long tradition of antitrust. The Sherman Act from 1890, founded by Senator John Sherman, aimed to protect the consumers. The antitrusters tried to stop monopolies & cartels from harming consumers by charging too high prices and delivering bad services. America`s trustbusters broke up Standard Oil in 1911, AT&T’s Bell System monopoly in 1983 and performed a crusade against Microsoft in the 1990s.
Until recently America`s antitrust focused on consumer welfare and economics. The trustbusters tried to block corporate mergers that would lead to higher prices. But they blessed business deals that aim to increase efficiency, promote innovation and would drive prices lower ( politico).
President Biden supports a new antitrust trend, known as hipster antitrust. A new group of new trustbusters, who call themselves "progressives", came to power. They don´t care about consumers, prices and economics. They see big companies, especially Amazon, Apple, Google & Facebook, generally as evil and they try to fight Big Tech whatever they do.
Biden appointed Lina Khan, a "progressive" activist who became famous by writing an anti-Amazon pamphlet, to chairperson of the powerful Federal Trade Commission (FTC), America´s antitrust authority. Khan is fundamentally changing the FTC and how America approaches competition policy (inside ). "Lina Khan, has an explicit beef with Amazon and has stated publicly, absent any formal hearing, that the company is guilty of antitrust violations and should be broken up. (yalejreg.com wsj.com).
Biden also supports other "progressives" in their crusade against Big Tech, including Elizabeth Warren, Tim Wu (White House National Economic Council), Jonathan Kanter (Assistant Attorney General for Antitrust) Rohit Chopra (Director, Consumer Financial Protection Bureau), David Cicilline. None of the new antitrust activists is an economist, they all are lawyers who are not educated in economics.
The new trust busters began a crusade against Big Tech. They claim that Amazon, Google, Apple &
Facebook have monopoly power and that the technology giants abuse their
alleged power and harm the economy. Sen. Warren claims: "Today’s big tech companies have too much power — too much power over our
economy, our society, and our democracy. They’ve bulldozed competition,
used our private information for profit, and tilted the playing field
against everyone else. And in the process, they have hurt small
businesses and stifled innovation" ( teamwarren).
Is big really so bad? Apple, Google, Facebook & Amazon became huge because billions use their services and buy their products. Big Tech doesn`t need to be our friend, but the giants have to behave friendly otherwise they would go out of business. Adam Smith declared “it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest”. If the customers wouldn`t be served well, they would walk away. If Big Tech would be too expensive, too slow, too inconvenient, too unreliable, their customers would leave. Consumers love Big Tech because they benefit from them. The Big Tech haters don´t understand these basic facts, maybe they don´t even care.
Instead of fighting against price hikes the progressive trustbusters fight against price cutting, claiming that lower prices squeeze competitors out of the market and create a monopoly (lawyers call this predation). Biden protege Khan laments that Amazon is too cheap which is bad (yalelawjournal ). Really? Since Amazon started in the late 1990s, offering low prices, the number of competitors has been swiftly climbing year over year. Today there are thousand of companies selling online, including giants like Walmart, Target, Best Buy & Costco, who all developed large online departments, and there are also online platforms like Overstock, Shopify, Wayfair, Etsy & Ebay, who all are copying Amazon`s success. A former Amazon employed used his knowledge to start in 2012 Instacart, an online grocery with annual revenues around $1.5 billion. These competitors all are getting better over the time, challenging Amazon more and more. Apparently Khan lost the sense of reality.
Amazon has low prices because they created a huge network of distribution centers which are efficient and reduce the average costs. The competition with Amazon forces the whole retail industry to act efficient, to cut costs and to curb prices. Without Amazon today´s inflation rate would even be higher. How to explain that to economic illiterates like Khan & Co?
The hipster antitrust movement ignores, maybe even doesn`t understand, that there is plenty of competition. History shows that the power of companies is always constrained by competition. When a corporation has success, her rising profits attract automatically others who want a share from the pie. The Internet makes it very easy to compare prices and to switch to other shops, news providers & entertainers, sharpening the competition. Customers can choose the company which has the best quality, the best service and/or the lowest prices which gives the consumers a lot power. As a result, customers have more power than the corporations.
The other Big Tech companies aren`t monopolies either. Nobody is forced to buy Apple`s iPhones, iPads, iMacs, MacBooks and services. Customers can purchase similar products & services from Microsoft, Google, Samsung, Huawei and a lot of other technology companies. And customers can choose between Apple´s iOS and Google`s Android. Nobody needs to use Google services like search & maps. There are other search engines like Microsoft`s Bing, DuckDuck Go, Yandex & WolframAlpha and people also can use Apple Maps, MapQuest or TomTom. The Facebook/Instagram tandem competes against Twitter for users and advertiser dollars.
Senator Warren and other trust busters claim that Big Tech companies "have hurt small businesses and stifled innovation". Really? Did they ever hear of Uber, Lyft, Arbnb & Pinterest? These so-called unicorns came out of nowhere. They were founded just years ago and are already valued $80 billion and more (nypost).
Contrary to the claims of Khan & Co. Amazon did not stop the growth of new online sellers. The Canadian e-commerce platform Shopify, founded in 2006, reached a market capitalization of about $150 billion, Wayfair, an e-commerce site for home supplies, started in 2002 and reached a market capitalization of around $18 billion and Casper, launched in 2014, who sells mattresses online, became a brand name almost over night.
Senator Klobuchar drafted a bill which aims to give Khan and her FTC much more power (cnbc springboard ). She wants to end Amazon`s Marketplace where the company sells - besides her own products - the products of other shops and she wants to prevent Amazon from offering its low-cost Basics brand products ( yalejreg ). Klobuchar also wants to ban Amazon from offering free shipping on select products through Amazon Prime. The Senator ignores that powerful competitors like Walmart & Target - and many other retailers - have been doing the same business for years ( reason).
Ignoring the strength of Walmart and other traditional retailers Klobuchar wants to fine Amazon with 15% of the revenues for just doing its business, which would empower big competitors like Walmart. Corruption? That`s not enough. Klobuchar also wants to stop Google to show Google Maps on her search results. Apparently Klobuchar, Khan & Warren try to destroy America´s big technology firms for ideological reasons.
Punishing Growth & Efficiency
The crusade is not only unjustified, it does also harm to the society. Khan & Co. want to punish growth and efficiency. If the crusaders get their will many services - including Amazon Prime which offers free shipping in a very short time - will not be available any more or
for much higher prices (medium ). The proposed reforms would especially hurt families who rely on digital shopping and online communication every day. Many small retailers would go out of business because they would loose Amazon´s efficient online platform & logistic services to sell nationwide. America´s inflation would accelerate because the downwards price pressure by Amazon would disappear.
The pursued regulatory overkill
would also create more bureaucracy which " is the death of any
achievement” according to Einstein. New regulations and restrictions
reduce the productivity & efficiency of Big Tech companies; they
shrink their abilities to further innovate, making business more
complicated and costly.
The trustbusters want to throw sand into the gears of successful companies, which are the engine of the US economy. New regulations and inquiries reduce Big Tech`s abilities to further innovate because they are occupying management capacities and are slowing decision processes - making business more complicated and costly. Innovators and startups would be discouraged when they know that strong growth would be punished.
Big Tech`s strategic thinkers will be preoccupied with new regulations & inquiries and will have less time & energy for innovations. Instead of thinking about new products & services for their customers and to improve existing ones the strategists will have to think about new laws and how to comply with external bureaucrats and investigations. The continuous attacks of the trustbusters already cause huge costs for Big Tech and may force them to hike their prices and/or reduce their services, which would harm the consumers and the US economy. They also will reduce the capabilities to hire new talents and will curb salaries of Big Tech´s employees.
Climbing costs & bureaucratic frictions create headwinds which will slow growth of innovative & successful companies and with them the US economy. More regulation also encourages corruption because powerful politicians & bureaucrats can blackmail corporations by threatening them to regulate them more (ssrn). Hello Senator Klobuchar.
Antitrust law was designed to protect the consumers but Washington`s new trustbusters don´t care about customers, they want to create a bureaucratic world as described by Franz Kafka. Khan’s fellow commissioner Rebecca Slaughter demands that “antitrust should be used to accomplish political and social goals” ( thecentersquare). The uncertainty of political demands, let alone new regulations imposed through antitrust enforcement threats and action, amounts to an enormous cost passed directly to American consumers through higher prices and reduced economic dynamism (insidesources). Big Tech are serving the consumers, the society, by spurring price reductions, delivering better quality & innovation. US politicians are making the world a poorer place by fighting the quartet of Google, Amazon, Facebook, and Apple that have helped so many Americans and made the Covid-19 pandemic a little more bearable ( twitter).
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