If there’s one thing last week’s hearing of the Senate subcommittee on Antitrust, Competition Policy, and Consumer Rights revealed about policymakers, it’s that they haven’t got a clue how markets work.
The purpose of the hearing, overseen by Sen. Mike Lee, was to gain a better understanding of online advertising and to determine whether or not Google has indeed been anticompetitive in this sector of the economy. Of course, politicians from both sides of the aisle strayed from the set topic to grandstand. At one point, Sen. Richard Blumenthal, Connecticut Democrat, even tried to lay the “death of local journalism” on tech companies.
Policymakers should strive to gain a more complete understanding of market processes before rushing to make drastic and foundational changes to institutions and laws that directly impact them.
For conservatives, the hearing served as an airing of grievances against what they perceive to be anti-conservative bias. A major point of focus was the case of Google and The Federalist, wherein Google requested the online publication moderate its comments section or run the risk of losing its ability to utilize Google’s ad tools to run advertisements.
Sen. Josh Hawley went after the tech giant hard, insinuating that Google has extraordinary power to influence the way sites are managed. Mr. Hawley believes The Federalist can’t be held liable for comments on their website because of Section 230 of the Communications Decency Act. Ironically, Mr. Hawley has been a staunch opponent of this law because he views it as a tool used by companies like Google to suppress conservative speech. Mr. Hawley fails to realize how the law tries to ensure a good community standard of content moderation.
Clients using Google’s ad service don’t want their product appearing next to a comment section espousing racist sentiments. Not only is forcing advertisers to carry ads on websites with content they abhor an egregious violation of the First Amendment, it’s also just bad business. Google simply wants to make sure their clients are happy, otherwise they run the risk of losing them. It’s not like this is an uncommon practice. As Geoffrey Manne, president of the International Center for Law and Economics stated, Google wants to maximize the value of its ads, something any advertiser is going to do, regardless of size.
For Democrats, the hearing served as a referendum on the consumer welfare standard, who feel that the standard has allowed for the formation of large, concentrated businesses that drive all other businesses out of the market, leaving consumers with no other options.
Many of the proposals that are likely to come from these Democrats, like banning mergers or exempting politically-favored companies from antitrust action, or just a general politicization of antitrust enforcement decisions, represent a legitimate threat to American jobs and a hindrance to economic recovery post pandemic. In pursuing such policies, they fail to recognize the biggest benefit of the consumer welfare standard is that it provides a fundamentally sound way to regulate competition in a way that minimizes harm to consumers while allowing businesses to operate without the worry of being targeted simply for being big.
There were, however, a couple of key areas where Republicans and Democrats united in their bashing of Google. One area was their narrow definition of the market. Instead of looking at the overarching ad market, in which Google seems far less of a dominant force, both sides sought to shrink the scope of the market down to a highly particularized market setting, making Google seem much more like a monopoly — all this to serve political talking points rather than reality.
Carl Szabo, vice president and general counsel for Net Choice, recognized this immediately, pointing out it would be foul play for politicians and regulators to apply such logic to consumer welfare standards in antitrust, because at that point, they are merely defining markets in such a way to get their preferred results.
Another area of agreement between parties, was the rather alarming level of praise they heaped onto Europe for its strict regulation of tech companies. If anything, it should be the other way around. Europe needs to be looking to the U.S. and taking notes on how to better approach tech regulation. There is a reason that only three out of the top 50 most innovative companies in the world are in Europe. By contrast, over half of the top 50 companies are located in the U.S.
Mr. Lee urged his colleagues to “show some humility about our understanding of how markets work.” The senator from Utah couldn’t be more correct. The reality is that many of the lawmakers on Capitol Hill don’t understand how markets work, and that is highly alarming. They should listen to Mr. Lee and read up on the issue before setting policies that could prove disastrous.
• James Czerniawski is the tech and innovation policy analyst with the Libertas Institute, a free-market think tank in Utah and an associate contributor with Young Voices. He is also a member of the Alliance on Antitrust.