antitrust

The Consumer Choice Center stands opposed to antitrust actions on innovative tech firms

Today, the Consumer Choice Center sent a letter to the members of the House Judiciary Committee to explain our opposition to a series of bills soon to be introduced on the House floors related to antitrust actions.

The full letter is below, and available in PDF form to share.

Dear Member of the House Judiciary Committee,

As a consumer group, we write to you to raise your attention about a series of bills that will soon be introduced on the floor of the House and make their way to the House Judiciary Committee.

These bills, soon to be introduced by Democrats and co-sponsored by some Republicans, relate to antitrust actions to be taken against tech firms based in the United States.

These include the Merger Filing Fee Modernization Act, End Platform Monopolies Act, Platform Anti-Monopoly Act, Platform Competition and Opportunity Act, and Augmenting Compatibility and Competition by Enabling Service Switching Act.

In our view, these bills are not about concern for the consumer, the consumer welfare standard as traditionally understood in antitrust law, or even because companies like Amazon, Facebook, Twitter, and Microsoft are “too big.” 

Rather, these actions are a zealous takedown of American innovators that will harm consumers and punish innovation. This is a dangerous precedent.

Many of the tech companies in the crosshairs offer free or inexpensive services to consumers in a competitive marketplace that boasts hundreds of social apps for messaging, photo sharing, social networking, and online marketplaces that offer quick delivery, stellar service, and unbeatable prices.

As consumers of these services, we understand that there are often decisions made by these companies that raise concerns. For political conservatives, the issue hinges on whether there is bias in the moderation of accounts, comments, and products. For liberals, it is about whether these companies are too powerful or too big to be reined in by government, and questions about how they pay their taxes or whether various tech companies played a part in getting Donald Trump elected in 2016.

These are all valid concerns, and we have been active in calling them out where necessary.

However, using the power of the federal government to break up innovative American companies subject to domestic law, especially in the face of mounting competition from countries that are not liberal democracies, such as China, is wrong and will lead to even more unintended consequences.

The American people benefit from a competitive and free market for all goods, services, and networks we use online. Weaponizing our federal agencies to break up companies, especially when there is no demonstrated case of consumer harm, will chill innovation and stall our competitive edge as a country.

If there are breaches of data or if consumer privacy is compromised, the Federal Trade Commission should absolutely issue fines and other penalties. We agree with this. If there are egregious violations of law, they should be dealt with immediately and appropriately.

Let us be clear: The internet is the ultimate playground for consumer choice. Government attempts to intervene and regulate based on political considerations will only restrict consumer choice and deprive us of what we’ve thus far enjoyed.

The overwhelming majority of users are happy with online marketplaces and with their profiles on social platforms. They’re able to connect with friends and family around the world, and share images and posts that spark conversations. Millions of small businesses, artists, and even news websites are dependent on these platforms to make their living. This is an especially important point.

Using the force of government to break apart businesses because of particular stances or actions they’ve taken, all legal under current law, is highly vindictive and will restrict the ability for ordinary people like myself or millions of other consumers to enjoy the platforms for which we voluntarily signed up. 

We should hold these platforms accountable when they make mistakes, but not invite the federal government to determine which sites or platforms we can click on. The government’s role is not to pick winners and losers. It’s to ensure our rights to life, liberty, and pursuit of happiness, as the Declaration of Independence states. 

As such, when these bills come before you as legislators, we urge you, as a consumer advocacy group speaking for millions of people just like you around the country, to reject them. 

Sincerely Yours,

Yaël Ossowski

Deputy Director, Consumer Choice Center

yael@consumerchoicecenter.org

Consumer Choice Center Signs Joint Letter to Senate Judiciary Committee on Antitrust Hearings

September 15, 2020
The full letter can be downloaded here

The Honorable Michael S. Lee
Chairman, Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

The Honorable Amy Klobuchar
Ranking Member, Senate Committee on the Judiciary
Subcommittee on Antitrust, Competition Policy and Consumer Rights

Dear Chairman Lee and Ranking Member Klobuchar,

We, the undersigned, write today to provide you with a statement for inclusion in the record of the Subcommittee’s September 15th hearing, “Stacking the Tech: Has Google Harmed Competition in Online Advertising?”[1] We are a group of legal experts, economists, and consumer and taxpayer advocates who believe in the importance of promoting competitive markets and defending the rule of law.

We believe that weaponizing antitrust for broader socio-economic purposes would fundamentally alter the primary goal of antitrust and seek to address the increasing calls to move away from the consumer welfare standard[2] and to use antitrust as a tool for unrelated concerns.[3] While signatories herein may prefer various approaches for addressing non-competition concerns about issues such as privacy, online content, liability, and myriad other popular topics associated with technology firms, we uniformly agree that any congressional assessment of issues related to digital markets must be characterized by rigorous economic analysis, productive in promoting competition and consumer welfare, and based on predictable and enforceable standards.

As discussions about antitrust law enter mainstream discourse, we thank the Subcommittee for the opportunity to provide a statement for inclusion in the record, and for providing an appropriate forum specifically dedicated to the discussion of antitrust concerns.

PUTTING RECENT PROPOSALS INTO PERSPECTIVE

Before addressing the specific topic of today’s hearing, we find it critical to make note of the economic consequences of many of the recent proposals to revise antitrust law, which seriously risk making the American economy and consumers substantially worse off across a wide array of industries. Many discussions around antitrust have centered on large, successful American technology companies, and the House Judiciary Committee has launched an investigation and we expect to see certain proposals come out of that investigation. However, the implications of today’s antitrust debate extend far beyond just “Big Tech.”

These proposals — which are likely to materialize within the days or weeks following today’s hearing —include aggressive merger prohibitions, inverting the burden of proof, allowing collusion and antitrust exemptions for politically favored firms, and politicizing antitrust enforcement decision-making more generally. Additionally, arbitrary or overly broad antitrust enforcement would hamper economic recovery and risks job losses as the nation recovers from the economic slow-down, evolving market dynamics, and changing consumer needs resulting from the global pandemic.

I.            The Current State of the Antitrust Debate

We fear that both sides of the aisle are pushing for the weaponization of antitrust, either as a tool to punish corporate actors with whom they disagree or out of a presupposition that big is bad. Unfortunately, the antitrust debate has begun to devolve into a litany of unrelated and often contradictory concerns, unsubstantiated and dismissive attacks, and seemingly a presumption that any market-related complaint that can be made on the internet can also be cured by the panacea of antitrust. This highly charged atmosphere has led to radical proposals that run contrary to economic evidence and endanger significant advances made in antitrust scholarship.

The Senate Committee on the Judiciary — and specifically this Subcommittee — has an important role to play. While there are many issues plaguing our society today, we believe that this Committee is equipped to examine antitrust soberly and without misdirection from legitimate anger over other issues which antitrust is not designed to address.

CONSIDERATIONS FOR FURTHER INQUIRY

II.            The Law: New Technology, Same Principles  

a.      The consumer welfare standard has greatly benefited antitrust and is underrecognized as a significant narrowing of federal government power in the last half century and a major victory for the movement to preserve the rule of law.

It is important to consider what is at stake. Using antitrust to achieve policy or political goals would upend more than a century of legal and economic learning and progress. The need to bring coherency to antitrust law through a neutral underlying principle that cannot be weaponized is what led to the adoption of the modern consumer welfare standard. It is broad enough to incorporate a wide variety of evidence and shifting economic circumstances but also clear and objective enough to prevent being subjected to the beliefs of courts and enforcers.[4]

Therefore, we would like to stress the need to distinguish between the proper and improper uses of antitrust in approaching discussions of market power, and are concerned that today’s hearing could lead to the use of antitrust to address concerns surrounding online content moderation, data privacy, equality, or other socio-political issues that are unrelated to the competitive process. Weaponizing antitrust for broader socioeconomic purposes would fundamentally alter the primary goal of antitrust, undermine the rule of law, and negatively impact consumers.

I.            The Role of Presumptions

b.      Approaches to antitrust enforcement based on presumptions of anticompetitive harm drastically upend core tenants of our legal system by inverting the burden of proof and diminishing the role of the federal judiciary.

Returning to the highly interventionist pre-1970s antitrust jurisprudence through burden shifting provisions that would require a company to prove it is not a monopoly would create greater incentives for the government and private plaintiffs to file suit. More importantly, however, these reforms are not needed because current antitrust law has adequate power to intervene and claims of lax antitrust enforcement are demonstrably false. The FTC and the DOJ have only lost a handful of cases in the last decade, and private litigants continue to bring monopolization claims. Outside of the courtroom, multitudes of mergers and anticompetitive actions are prevented out of fear of government action.

II.            The Market: Questions of Concentration and Definitions

c.       Digital platform markets are not traditional linear markets. They are two-sided markets and competition typically turns on non-price factors.

One of the most important questions to address in this discussion is that of market definition. Importantly, digital advertising is not a traditional, linear market. It is a two-sided market in which advertisers try to influence the online behavior of consumers through an intermediary.[5] Traditionally, market definition is framed around a static product with a distinct type of customer. With advances in technology, this build-and-freeze model breaks down as advertising platforms evolve.

However, as Ronald Coase pointed out: [I]f an economist finds something – a business practice of one sort or other – that he does not understand, he looks for a monopoly explanation. And as in this field we are rather ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on monopoly explanations frequent.[6] Indeed, when it comes to the innovative business model that has engulfed digital advertising, regulators are struggling to apply the correct regulatory framework.

d.      The relationship between concentration and competition in the market is tenuous, and structural changes in the economy have resulted from increased competition.

A positive correlation between high market concentration and profitability does not indicate monopolistic practices, and the underlying drive for commercial success can simultaneously enhance pro-consumer efficiencies.[7] In other words, concentration alone does not indicate lack of competition, as firms capture a larger slice of the market through higher productivity and innovation.[8] Some critics argue that systematic anticompetitive conduct is inherent in the digital advertising model, or that the rapid growth or dominance of these platforms allow them to exist entirely insulated from competitive market forces.

As then-Judge Clarence Thomas wrote in U.S. v. Baker Hughes, “[e]vidence of market concentration simply provides a convenient starting point for a broader inquiry into future competitiveness.”[9]It is a step in the right direction to for today’s hearing to analyze the exercise of market power, but it is critical to determine whether the power of the market is being used to benefit or harm not the competitor, but instead the consumer. That is the relevant inquiry.

CONCLUSION

As Robert Bork pointed out, “[a]dvertising and promotion are particular obsessions of antitrust zealots.”[10]

We encourage the Committee to continue in this effort and to reclaim this debate from the politicized approach that seeks to transform our antitrust laws and refocus the conversation on enforcement, market analysis, and the core purpose of antitrust.

We thank you for your oversight of this important issue and ask that this letter be included on the Committee or Subcommittee’s website and repository. Please feel free to contact us should you have any questions or requests for additional input from signatories. We welcome the opportunity to further discuss these views and relevant proposals or congressional assessment with the Committee.

Sincerely,


[1] See Online Platforms and Market Power, Part 6: Examining the Dominance of Amazon, Apple, Facebook, and Google. Hearing Before the House Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law, 116th Cong, (July 29, 2020), available at: https://judiciary.house.gov/calendar/eventsingle.aspx?EventID=3113

[2] See Robert H. Bork, “The Antitrust Paradox: A Policy At War With Itself” (1978).

[3] See, e.g. Douglas H. Ginsburg, Originalism and Economic Analysis: Two Case Studies of Consistency and Coherence in Supreme Court Decision Making, 33 Harvard Journal of Law and Public Policy. (217–18) (2010) (discusses political goals read into the Sherman Act by the Supreme Court).

[4] Shifting away from the consumer welfare standard would catapult antitrust law back to the era of the 1960s when, in Justice Potter Stewart’s words, “[t]he sole consistency that I can find is that, in litigation under [the antitrust laws], the Government always wins.” United States v. Von’s Grocery Co., 384 U.S. 270, 301 (1966) (Stewart, J., dissenting).

[5] See, e.g. Ashley Baker, Comments Submitted to the DOJ Antitrust Division Regarding Competition in Television and Digital Advertising. (June 2019), available at: http://bit.ly/2PwehnJ.  

[6] Coase, R.H. “Industrial Organization: A Proposal for Research. Policy Issues and Research Opportunities in Industrial Organization.” (p. 67). (Victor R. Fuchs ed.) (1972).

[7] Harold Demsetz, Industry Structure, Market Rivalry, and Public Policy, 16 Journal of Law & Economics

(April 1973), 1-8.

[8] See David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reenen. “Concentrating on the Fall of the Labor Share.” American Economic Review, 107 (5): 180-85 (2017).

[9] See U.S. v. Baker Hughes

[10] See Robert H. Bork, “The Antitrust Paradox: A Policy At War With Itself” (p. 314) (1978).
Organizations listed for identification purposes only.


Sincerely,
Ashley Baker
Director of Public Policy
The Committee for Justice


Robert H. Bork, Jr.
President
The Bork Foundation


Wayne Brough
President
Innovation Defense Foundation


James Czerniawski
Tech and Innovation Policy Analyst
Libertas Institute


Richard A. Epstein
The Laurence A. Tisch Professor of Law,
New York University School of Law
The Peter and Kirsten Bedford Senior
Fellow, The Hoover Institution
The James Parker Hall Distinguished
Service Professor of Law Emeritus and
Senior Lecturer, The University of Chicago


Tom Giovanetti
President
Institute for Policy Innovation


Katie McAuliffe
Executive Director
Digital Liberty


Doug McCullough
Director
Lone Star Policy Institute


Grover G. Norquist
President
Americans for Tax Reform


Curt Levey
President
The Committee for Justice


Yaël Ossowski
Deputy Director
Consumer Choice Center


Eric Peterson
Director of Policy
Pelican Institute


Thomas A. Schatz
President
Council for Citizens Against Government
Waste


Timothy Sandefur
Vice President for Litigation
Goldwater Institute


Pete Sepp
President
National Taxpayers Union


David Williams
President
Taxpayers Protection Alliance


Josh Withrow
Senior Policy Analyst
FreedomWorks

In Kamala Harris, do consumers have an ally or a foe?

This week, Democratic presidential candidate Joe Biden revealed Sen. Kamala Harris of California as his running mate for the November general election against President Donald Trump.

Because Harris’ influence on the Biden campaign will loom large, and be important to whomever American voters choose in the fall, it’s worth looking at some of her ideas and policies and how they would have an impact on consumers.

Let’s take a dip, shall we?

HEALTHCARE

On her original presidential campaign website and throughout the Democratic primary debates, Harris was adamant about banning private healthcare insurance in favor of a Medicare For All plan. She later backed out once she was questioned by party activists.

With that in mind, considering Biden was nominated to be his party’s candidate on a platform of not seeking Medicare For All, a plan to expand the government health insurance program to seniors to the entire population, it seems there may be healthy disagreement on this point.

As I’ve written in a few outlets, the idea of a Medicare For All health insurance system would rob consumers of competition and choice, and likely lead to less quality of healthcare than we actually receive. It would mean that healthcare decisions would be placed in a complex hierarchy of bureaucratic agencies immune from market forces. That would inevitably lead to higher costs overall – no matter who foots the bill.

Harris being on the ticket doesn’t mean M4All is now on the docket for the Democratic Party, but it does mean that ideas about the government reorganizing health insurance will certainly be a part of a potential Biden Administration in the future. That’ll be something to keep an eye on.

TECH

As we covered during the debates in 2019, Sen. Harris petitioned Twitter to remove President Donald Trump from its service. Those calls weren’t central to her rhetoric on tech regulations, but they at least revealed her mindset regarding content on social media platforms, and who should be allowed to have an account. In some speeches, she’s come out as more hawkish on online censorship, which should good everyone worry.

Unlike some of her past primary opponents, she was rather soft on the question of antitrust and whether the tech giants in Silicon Valley should be broken up, which is a relief for consumers.

Most of the animus against tech companies has very little to do with concern for consumers, and much more to do with the new generation of gatekeepers using technology and innovation to provide better services. Most consumers prefer these new innovations and want them to thrive, not be broken up.

For some observers, her political career in California and proximity to tech firms mean she’ll be an asset rather than a liability on future tech regulation. The outlet Marketwatch dubbed her a “friend, not a foe, of Big Tech” and the Wall Street Journal similarly gave her praise, though with some caution.

VAPING

What isn’t a surprise to listeners of Consumer Choice Radio is that Sen. Harris is no friend of vaping and harm-reducing innovations.

She penned a letter last year accusing the FDA of being soft on vaping and for not banning all vaping products outright. That would have been disastrous for the former smokers who rely on these products.

She took it a step further by linking legal nicotine vaping products to the bootleg THC vaping devices that caused lung injuries throughout 2019, which we’ve debunked in our own work at the Consumer Choice Center.

If Harris’ worldview remains the same, vapers won’t have a friend in the potential future VP.

CANNABIS

And lastly, we come to cannabis, a favorite topic of those who dub Harris “The Cop Who Wants to be (Vice) President,” like Elizabeth Nolan Brown of Reason.

During Harris’ time as a prosecutor in California, her reputation as an anti-cannabis voice was well-known.

But as our friends at Marijuana Moment mention, she’s changed her mind over the years, from being a staunch opponent to advocate:

Though she coauthored an official voter guide argument opposing a California cannabis legalization measure as a prosecutor in 2010 and laughed in the face of a reporter who asked her about the issue in 2014, she went on to sponsor legislation to federally deschedule marijuana in 2019.

Where Vice Presidential Candidate Kamala Harris Stands On Marijuana

Since dropping her campaign to be president, she’s become more vocal, making the argument for legalizing cannabis at the federal level, though she’s

Overall, there’s a lot to digest on a potential Kamala Harris Vice Presidency. On behalf of consumers, let’s hope there’s more good than bad.

Antitrust tech hearings dig for consumer harm but come up short

Armed with face masks and fresh customer complaints, members of the House Subcommittee on Antitrust, Commercial, and Administrative Law convened both virtually and in-person on Thursday, for the first of many hearings on competition in the tech sector.

It was a six-hour marathon of gobbledygook legal turns of phrase and static-prone troubleshooting for lawmakers.

The witnesses were CEOs from some of the four largest companies in America: Jeff Bezos of Amazon, Mark Zuckerberg of Facebook, Tim Cook of Apple, and Sundar Pichai of Google.

Together, these companies serve billions of global consumers for a variety of needs, and have become very rich by doing so. They employ millions of people, make up big portions of the American economy, and have been the trailblazers for innovation in virtually every free nation.

It is also true that they’ve made many mistakes, errors in judgment, and have made it easy to be bashed by all sides.

Despite that, these companies are true American success stories. And that’s not even considering the industrious biographies of their CEOs on the witness stand: an immigrant from India; the son of a teenage mother and immigrant stepfather; a college dropout; and a gay southern man shunned by the Ivy League. Each of them is a self-made millionaire or billionaire in their own right.

But in the context of this hearing, they were America’s villains.

The potshots in the hearing came from both Democrat and Republican congressmen, each using their bully pulpits to reel out various accusations and grievances on the representatives from Big Tech. But lost in all of this was the consumer.

The scene was analogous to George Orwell’s Two Minute Hate on repeat, the face of Emmanuel Goldstein replaced by a WebEx video call on full screen with smiling CEOs surrounded by the furniture in their home offices.

For Democrats, these companies have grown far too large using unscrupulous business practices, beating competitors with lower prices, better service, speed, and slick branding – allowing them to purchase or bully their competition.

For Republicans, it’s all about the bias against conservatives online, facilitated by the thorny content moderation that selectively edits which social media posts are allowed to stand.

What’s missing from this story so far? American consumers.

The justification of the hearing was to determine whether these companies have abused the trust of the public and whether consumers have been harmed as a result of their actions.

But more often than not, questions from committee members hinged on the and “business acumen” of decisions taken within the company, classifying rudimentary strategy decisions as illegal and hostile moves.

Platforms Opening to Third-Party Sellers

An example is Rep. Pramila Jayapal, of Washington State. She represents the district where Amazon was founded by Jeff Bezos. She condemned Amazon for collecting data on third-party sellers who are able to use Amazon’s website to sell products.

“You have access to data that your competitors do not have. So you might allow third-party sellers onto your platform, but if you’re continuously monitoring the data to make sure that they’re never going to get big enough to compete with you, that is the concern that the committee actually has,” said Jayapal.

Here, we’re talking about Amazon’s online platform, which sells millions of goods. Two decades ago, Amazon opened up its platform to merchants for a small fee. It was a win for sellers, who could now have easier access to customers, and it was a win for customers who now can buy more products on Amazon, regardless of who the seller was.

When Amazon sees that certain product categories are very popular, they will sometimes make their own, knowing they have the infrastructure to deliver products at high satisfaction. This brand is called Amazon Basics, encompassing everything from audio cables to coolers and batteries.

Rep. Jayapal says that by collecting data on those merchants in their store, Amazon is effectively stealing information…that sellers voluntarily give in exchange for using Amazon’s storefront.

However, the end result of the competition between Amazon’s third-party sellers and Amazon’s own products (on Amazon’s platform) is something that is better for the consumer: there is more competition, more choice, and more high-quality options to choose from. This elevates the experience for a consumer and helps save them money. This is far from harm.

The same can be said of Apple and its App Store, which came under fire from the chairman of the committee, Rep. David Cicilline. He said Apple was charging developers who use the App Store “exorbitant rents” that veered toward “highway robbery”.

Apple CEO Tim Cook was quick to retort by pointing out that the App Store is a platform for its own apps, but it also allows third-party developers to use that store for a fee. This is an entirely new market space that never existed before Apple opened it, and thus is a net gain for any developer who uses the store, and benefits consumers who click and download even more.

Business As Usual

Throughout the hearing, public officials pointed to internal documents as proof of the malfeasance of the tech firms. The documents were unearthed by the committee and contained emails and memos on mergers, acquisitions, and business practices from all four tech firms.

The Financial Times classified these documents as evidence that the companies “chased dominance and sought to protect it.”

Rep. Jared Nadler of New York chased down Mark Zuckerberg for his decision to purchase the photo-app Instagram back in 2012, calling the move “outright illegal” because he believed Facebook bought it to “essentially put them out of business.”

Today, Instagram is an incredibly popular app that has grown to half a billion users, thanks to Facebook’s investments, talent, and integration. It’s made consumers very happy, and has become an attractive product for advertisers as well. Again, no harm for the consumer.

Pro-Consumer, not Pro or Anti-business

One of the most astute lines from the hearing came from the sole representative from North Dakota.

“Usually in our quest to regulate big companies, we end up hurting small companies more,” said Rep. Kelly Armstrong. Indeed.

And add to that the eventual scenario whereby only the highly connected and vastly wealthy tech companies will be able to comply with stringent regulation from Washington. That’s not what consumers want, and it’s not what Americans want either.

If Congress aims to use antitrust power to break up or heavily regulate the enterprises built by Google, Amazon, Facebook, or Apple, it won’t be done lightly. It would likely leave a lot of damage in its wake for small and medium-sized businesses, many of whom rely on these major firms to conduct their business. In turn, consumers rely on those companies for products and services.

Each of these companies represent a case study in innovation, entrepreneurship, and giving the people what they want to create a huge network of consumers. There’s a lot to learn there.

Instead of using the law to break up companies, what if we learned from their success to empower more consumers?

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