What Bezos, Cook, Pinchai and Zuckerberg Should Have Told Congress about Antitrust Hysteria
Wednesday, July 29, witnessed the virtual browbeating (via video conference) of the CEOs of four of America’s top companies, Amazon, Apple, Facebook, and Google, by members of the House Judiciary Committee, most of whom never have produced anything other than intrusive statutes and convoluted regulations from which Congress often exempts itself.
Echoing concerns embodied in European competition law, not U.S. antitrust enforcement policy, about “market dominance,” Jeff Bezos, Tim Cook, Sundar Pichai, and Mark Zuckerberg were forced to defend their companies’ sheer sizes and some of their business practices. Curiously missing from the witness list was Satya Nadella, CEO of Microsoft Corp., which was engaged in talks to buy TikTok, a video-sharing app owned by China’s Bytedance, Ltd., popular among younger people, until President Trump said that he opposed the acquisition. Those discussions apparently have resumed.
I have devoted much of my academic career to studying and writing about political influences on competition law enforcement in the United States and Europe. Last week’s hearings were a poster child for the work the late Robert Tollison, the late Fred McChesney, I and other scholars have contributed to the literature. Applying public choice reasoning to the law enforcement process, we have documented the failures of the Justice Department and the Federal Trade Commission to understand the economic theories underpinning actual business practices in comparatively free markets, especially so in the cases of high-technology goods and services, such as web browsers, search engines, social media platforms, and online retailers, commonly known by economists as “network industries” because their value to individual consumers rises as more people connect to the same network.
It typically is true that one company or a small number hold dominant positions in network industries, provided that they serve their customers well. But those dominant firms may achieve prominence only temporarily in the face of Schumpeterian “gales of creative destruction” as new companies and new products displace them. Just ask the executives of IBM, once allegedly enjoying monopolies of tabulating machines, punch cards and mainframe computers (“Big Iron”), but failing until too late to grasp the importance of desktop computing; of AT&T’s government-sponsored monopoly of long-distance telephone lines, undermined by smartphones; Kodak, which continued to produce camera file while digital photography was seriously eroding its sales; or even the successors of Standard Oil (Exxon and other “Baby Oils”), which was losing market share to upstarts in Texas before the company was broken up in 1911.
Not many people had heard of Zoom before early March. Now it is pushing Google Hangouts and other video conferencing platforms to the sidelines. The pace of technological change is too swift for politicians and antitrust law enforcers to keep up with the evolution of market processes. The main lesson here is that taking a snapshot of market structures and their competitiveness at one point in time misses the dynamics. Any predictions based on those snapshots are bound to be wrong.
Ever since Robert Bork published The Antitrust Paradox (and in the mid-1980s was denied a seat on the Supreme Court largely owing to opposition from then-U.S. Senators Joe Biden and Ted Kennedy), many economists and legal scholars, including me, have viewed the antitrust laws as designed to protect consumers against the possible abuses of market power. That consumer-welfare standard now (as it was in the 1950s and 1960s) is under attack by a “big-is-bad” mindset leading to the conclusion that a company’s sheer size is objectionable, with little or no evidence that its customers have been harmed by high prices, shoddy products, or restrictions on their choices. The problem is that making market dominance the gold standard for challenging successful business enterprises – successful because consumers have put them into their leading positions – opens the door to complaints from rivals about “unfair competition,” which, if accepted by antitrust law enforcers, means that competition will be restrained rather than promoted.
When I wrote about the well-known failures of state and federal governments to respond quickly and effectively to the devastation wrought on the Gulf Coast by Hurricane Katrina in 2005, I quoted one victim of that natural disaster as saying that “Wal-Mart was his only lifeline” because the retailer had provided bottled water and other emergency relief supplies before the Federal Emergency Management Agency had mobilized to succor New Orleans. During the crisis caused by the public sector’s responses to the COVID-19 “pandemic”, shutting down “non-essential” local businesses, Amazon has been my personal lifeline, reliably delivering goods to my front porch two days after the orders were placed.
Where is the harm to consumers caused by Amazon, Apple, Google and Facebook? No one is forced to deal with any of them if their prices are too high or their services are too poor. None of them are “monopolists”, a term that is much overused, especially in high-technology markets. Unlike the U.S. Postal Service in first-class mail or the Transportation Security Agency, none of the companies whose CEOs faced hostile questions last week control 100 percent of the sales of any product.
Big may be bad in the eyes of some commentators, but no private business is as scary as the National Security Agency or the TSA, from whose “public services” no one can opt-out.