Economics: Antitrust - The War On America`s Consumers

 

(Drivebycuriosity) - It seems there is a war on America´s consumers. They like to buy cheap and they want quality and a broad selection. Millions benefit from Big Tech: Amazon`s fast & reliable deliveries and low prices and the products & services from Apple, Google & Meta (Facebook & Instagram) which are often for free.

Unfortunately this could end soon. There is an antitrust crusade against Big Tech. Since President Biden is in office a group of so-called "progressives" comes to power. They disagree with the recent antitrust politics which tried to protect the interests of the consumers (consumer welfare). The "progressives", the new trustbusters, don´t care about consumers, high prices, selection and quality. They see big companies, especially Big Tech, generally as evil and they are fighting them whatever Big Tech does. 

The "progressives" regard consumer interests - like low prices, quality and reliable services - as irrelevant. Instead they care about "firm size, fairness, labor rights, and the protection of smaller enterprises" (truth).  The trustbusters, which include hipster elites in academia, grassroots activists and leftwing strategists, are driven by a new anti-big ideology (itif.org ).  

The "progressives", at least the more radical, regard consume as bad for the environment and unethical and want to curb it. Rebecca Slaughter gets to the point. The commissioner of the powerful Federal Trade Commission (FTC), America´s antitrust authority, demands that “antitrust should be used to accomplish political and social goals” ( thecentersquare).

President Joe Biden signed an executive order to sharpen the regulatory controls and increased funding for the already mighty FTC and also for the antitrust division of the Department of Justice (DOJ). The US Congress introduced five (!) antitrust bills all aimed at limiting the power and size of Amazon, Apple, Meta and Google (iwf.org). Senator Elizabeth Warren demands that "monopolist" Amazon should be broken up (twitter ), ignoring that the company has to compete against Walmart, Target, Best Buy, Shopify, Ebay and myriads of other companies which offer similar services (I elaborated this here).

Biden appointed Lina Khan, a zealot who became famous with an anti-Amazon pamphlet, to chairperson of the FTC. "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). Instead of fighting against price hikes Lina Khan and other Big Tech crusaders fight against low prices. Biden protege Khan laments that Amazon is too cheap which is bad (yalelawjournal reason).  She claims that Amazon will become a monopolist because their "too low" prices will drive competitors out of business and will hinder potential competitors to emerge (here my critique). If Kahn, the FTC and other "progressives" get their will, Amazon will be forced to reduce their services and to raise prices.

Senator Klobuchar - supported by senators from both parties - started a bill which targets only Big Tech ( Apple, Google, Meta & Amazon) and excludes unfairly huge competitors like Walmart & Target ( reason). Klobuchar wants to reduce services by Apple, Google, Facebook & Amazon and might even break these companies up (klobuchar medium aier  thehill  springboardccia). 

Klobuchar`s bill (one of five) would end Amazon Prime and shut down Amazon`s private label business, where it sells own products in competition with the products from her suppliers ( medium). For instance the bill wants to eliminate practices such as Amazon’s sale of its own batteries in competition with Duracell (owned by Berkshire Hathaway promarket). To make things worse the bill also wants to levy a penalty of 15% of Amazon`s US revenues for each infraction ( medium). Therefore Amazon may be forced to shutter third-party sales which are more than 50% of Amazon`s online sales - which would ruin the businesses of many Amazon partners. Klobuchar also want to prevent Apple from pre-installing Facetime and iMessage on iPhones and forbid Google to show Google maps in search results (medium springboard).

The antitrust zealots, supported by President Biden, attack companies which have been curbing inflation by being efficient and offering cheap - and often free - services and products, like e-commerce, search, maps, entertainment etc.  If Klobuchar, Kahn & Co. get their will many services could disappear - like Amazon prime - , others will get more expensive ( ppi).

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 antitrust zealots see it as irrelevant that Big Tech helped millions during the pandemic. Even in the peak of the pandemic Amazon has been capable to support millions of customers and was able to deliver a huge amount of goods to everywhere in the US in very short time. Amazon could fulfill the gargantuan task of supplying America in a crisis because of her sheer size, a dense network of fulfillment centers and a lot of experience in stocking goods and in logistics. Amazon for instance saved potentially many lives - especially of elderly and disabled individuals - by making it possible for them to shelter at home during the current pandemic, shop online and receive necessary goods at their front door in a short time. Not interesting for Kahn, Slaughter & Co.

Without Big Tech the inflation would be even worse. Since going online Amazon has been been obsessed with efficiency, cost cutting and delivering goods cheap, fast & reliably. Google´s search machines & maps - which are free - help to find shops and other services with lower prices and intensify the competition as well.

The five bills - spreading over thousands of pages - are filled with juristic pettifoggery and hairsplitting. Together with the rearmed FTC and the DOJ antitrust department the bills want to make the lives of the CEOs as difficult as possible and throw sand into the gears of companies which are the engines of the US economy.

The antitrust crusade is creating friction and enormous cost for the attacked corporations - but also for the tax payers. Big Tech has to hire armies of lawyers and to pay $ billions for courts & fines which have to be paid ultimately by the consumers. A study by National Economic Research Associates (NERA) came the result that enforcing the ongoing bills and rearming the FTC would cost US economy $319 Billion ( ccianet). The sum includes effects of higher retail prices and the loss of services like Amazon Prime. Big Tech are serving the consumers, the society, by spurring price reductions, delivering better quality & innovation. The war on Big Tech is also a war on America´s consumers.