As winter sets in, the dark days for technology companies have been getting longer.
We sympathize with the increased anxiety over the poor data hygiene practices of leading tech platforms. And we agree that legislation clarifying the duties of those who collect and use personal information is important, as is delineating enforcement responsibilities among agencies and jurisdictions.
We’re concerned, however, by the tendency of some to shoehorn pet theories into the debate — notably the passionate but incomplete argument that it’s time to jettison decades of antitrust policy that limits the government to intervening only when market concentration has, or could, cause higher prices for consumers.
The vague alternative, proposed by critics on the left and right, is a return to a failed framework that boils down to, at best, a general belief that “big is bad” and, at worst, to politically-based payback for companies on the wrong side of an election.
Writing recently in the New York Times, law professor Tim Wu urged antitrust enforcers to launch sweeping lawsuits against Facebook and other “Big Tech” platforms that would likely last a decade or more. Anything less, Wu says, amounts to giving “these companies a pass when it comes to antitrust enforcement, allowing them to dominate their markets and buy up their competitors.”
The goal of Wu’s approach is not to actually win so much as it is to distract the companies’ leaders. The litigation is not a means but the end in itself. Paraphrasing Thomas Jefferson, Wu advocates spilling the corporate equivalent of the “blood of patriots,” attacking relentlessly regardless of whether there’s actually, you know, a sustainable case.
That logic is oddly aligned with the views of some, including President Trump and his former attorney general, Jeff Sessions, who believe they are justified in threatening companies they view as politically hostile on the fuzzy grounds that there is a “very antitrust situation.”
Wu’s best example of how this abuse of legal process works was the U.S. government’s 13-year crusade in the 1970s to break up IBM. At the time, IBM was the undisputed leader of the computer business.
Though the government was never able to prove the company had, as accused, “undertaken exclusionary and predatory conduct with the aim and effect of eliminating competition,” Wu believes the cost and uncertainty for the company of the extended legal fight saved the U.S. economy, giving personal computers an opening to proliferate and unseat IBM’s mainframe computer “monopoly.”
Never mind that IBM was the most successful seller of PCs and, through its relationship with Lenovo, still is. The company was certainly hurt by the ultimately abandoned case, as were, in later examples, Microsoft, Intel, Qualcomm and others.
But do antitrust jihads really help consumers more than it hurts them? Probably not. While well-founded prosecutions, such as those leading to the 1982 breakup of AT&T, did open critical markets, that success may not be duplicated elsewhere. In fact, Philip Verveer, a Visiting Fellow at the Harvard Kennedy School and the government’s lead counsel in the AT&T case, recently concluded that unleashing antitrust against today’s platform companies would amount to little more than “an act of faith that a successful prosecution would bring about benefits.”
There’s no need to gamble. The more effective regulator of digital markets has always been the happy confluence of engineering and business innovations in hardware, software and communications driving exponential improvements in speed, quality, size, energy usage and, of course, cost.
As computing continues to improve, markets become unsettled, innovation flourishes, and new leaders emerge. It’s not the arbitrary release of the “blood of patriots” that best corrects market imbalances. It’s the normal cycles of capitalism sped up by disruptive innovation, or what economist Joseph Schumpeter in 1942 famously called “creative destruction.”
If the tech sector was immune to that process, as some allege, we would expect stagnant productivity and wage growth, with profits protected and funneled to shareholders.
But that view doesn’t square with recent findings from Michael Mandel, chief economist at the Progressive Policy Institute. According to Mandel, who has been measuring the digital economy for decades, the technology sector broadly “accounted for almost half of non-health private sector growth between 2007 and 2017.” Technology prices, at the same time, “fell by 15%, compared to a 21 percent increase in the rest of the non-health private sector.”
Annual pay for tech workers (including hourly workers at e-commerce fulfillment centers) rose at more than twice the rate of other industries. Job growth in tech was four times faster.
Lower prices, higher pay and growing productivity: That doesn’t suggest a problem, or at least not one requiring radical restructuring of the companies driving the gains.
Consider the alternative approach taken in Europe, which has ramped up an aggressive attack of U.S. technology companies, applying the kind of expansive view of competition law urged by Wu and others. European businesses are still largely no-shows in the digital revolution, the result not of monopolies but of the micromanagement of employment, investment and infrastructure by regulators. Rather than freeing up local innovators to benefit European consumers, the European Union seems content simply to fine successful U.S. businesses.
The European approach highlights another problem with calls for U.S. antitrust enforcers to punish platform companies just for their size. Looking ahead to the technology drivers of the near future, such as artificial intelligence and autonomous vehicles, any hopes for the United States to lead internationally depend on heavy investment today in research and development. Many of the highest-risk bets are being placed by, you guessed it, today’s “monopoly” companies.
So what should U.S. regulators do? The starting point is vigilance in applying tried-and-true tools to new harms. The Federal Trade Commission, for example, has already brought over 150 enforcement actions against tech companies in the last decade for violations of consumer protection laws, reaching settlements that in many cases include decades of ongoing oversight and reporting.
The trade agency is gearing up a broad review of Facebook to see whether the company’s many embarrassing failures of the past few years amount to violations of a 2011 consent decree or, indeed, new violations. And the commissioners recently told Congress that they want additional resources and authority to better enforce existing law, joining a bipartisan call for targeted legislation, particularly on consumer data collection and use.
Tech’s loudest critics argue that the gears of government are turning too slowly. But that’s actually another reason why calls to simply throw out measured approaches to regulating competition are dangerous, despite their populist appeal. Even assuming new standards could be developed that wouldn’t stall the innovation engine driving the U.S. economy, rewriting federal competition law, realistically, would take Congress and the courts decades to hammer out.
Fortunately, the next wave of disruptive technology is always coming. It won’t fix everything. But if history is any guide, it will fix an awful lot — and do so without breaking everything that’s actually working.
Blair Levin is a nonresident senior fellow at the Brookings Institution. Larry Downes is project director at the Georgetown Center for Business and Public Policy.