Circus at the Antitrust Hearing

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Posted by Katie McAuliffe, Laurel Duggan on Thursday, July 30th, 2020, 3:03 PM PERMALINK

Congressional hearings of tech CEOs Sundar Pichai (Google), Jeff Bezos (Amazon), Mark Zuckerberg (Facebook), and Tim Cook (Apple) devolved into an hours-long circus as Democrats used the opportunity to create reelection campaign fodder.

The purpose of this hearing was to investigate alleged anticompetitive behaviors of dominant tech companies. About 25% of the questioning was somewhat related to antitrust policy—and this is a generous estimate. The remainder of questions revolved around partisan talking points like online hate speech, YouTube radicalization, and conservative censorship.

Antitrust law under the consumer welfare standard is designed to protect consumers from harm by monopolistic companies, not to protect companies from each other. None of the companies called before the Antitrust Subcommittee can be considered monopolies. Every one of them competes with other companies, tech or otherwise, both small and large, for revenue. And they are not using their strong positions in the market to harm consumers. Rather, they have each been using their resources to provide better products and slash prices.

Representative Armstrong (R-N.D.) wisely noted the harms of sweeping expanses of government power targeting certain companies, rather than going through the Federal Trade Commission’s already existent enforcement authority under the consumer welfare standard that operates on a case by case basis:

“When we try to hurt large companies, we entrench large actors and lock out new, smaller competitors."

On the rare occasion that Democrats’ questions were related to antitrust, the line of questioning belied the entire premise of the hearing: that concentration in tech is harming consumers. Time and time again, members of Congress asserted that Amazon and Facebook’s competitive strategies were harming their competitors by driving down prices. But the purpose of antitrust is to protect consumers, not competitors.

The mere fact that Apple was called to testify tells us that the hearing is not about antitrust; the hearing is about anger. Anger at tech for a number of reasons, but mostly because they are big.

Apple is in no way a violator of competition policy. Their primary business is hardware and software, not advertising, not data. They only hold 20% of the smartphone market13% of the personal computer market, and 28% of the tablet market. Tablets are the only personal device market in which Apple is dominant, and their share of that market is shrinking. As for operating systems, Android has more than double the market share as compared to Apple.  

“Apple does not have a dominant market share in any market where we do business. That is not just true for iPhone; it is true for any product category." ~Tim Cook

Apple created the entire App environment. Rather than keeping it as a closed system, they allowed individuals to create Apps which, once in line with certain conditions that provide security and support, can be downloaded by anyone on the App store. Some have complained that Apple’s App store discriminates against Apps that are not its own, but that opinion can’t be held for very long after looking into Apple’s policies, which they are very transparent about.

If Apple is a gatekeeper, what we have done is open the gate wider. We want to get every app we can on the Store, not keep them off.” ~Tim Cook 

In a particularly misguided line of questioning, Rep. Cicilline (D-R.I.) harangued Jeff Bezos for Amazon’s treatment of third-party sellers. “You say Amazon is only focused on what’s best for the customer. How is that possible when you undercut your prices and compete directly with third-party sellers?” Rep. Cicilline sees a conflict of interest between hosting outside retailers and offering low prices to consumers. He somehow fails to see that the diversity of retailers on Amazon drives down their prices, making products cheaper for consumers. 

Rep Cicilline went on to accuse Amazon of a litany of abusive business practices against retailers on its own site. He, along with several other members of Congress, claimed that Amazon exploited the small businesses it hosts through predatory pricing, and claimed that these businesses had no option other than Amazon.

There are 1.7M small & medium-sized businesses selling in Amazon’s stores. 200,000+ entrepreneurs surpassed $100,000 in sales in our stores in 2019. We estimate that third-party businesses selling in Amazon’s stores have created over 2.2M new jobs. ~Jeff Bezos 

In reality, Amazon has to compete with all retail, including Target, Costco, Kroger and Walmart, in addition to numerous online platforms that host third-party retailers, including Etsy, Facebook Market, EBay and Google Shopping. Even if this wasn’t the case, Amazon would have no obligation to host retailers on its privately-owned platform, and retailers have no obligation to use their services.

Like any retailer, Amazon could have chosen to keep their stores a closed system, selling only their own products. Instead, they opened the platform to hundreds of thousands of third-party retailers, many of whom are small businesses.

20 years ago, we welcomed 3rd-party sellers into our stores & enabling them to offer their products alongside our own. We didn’t have to invite third-party sellers into the store. We could have kept this valuable real estate for ourselves.” ~Jeff Bezos

Rep. Raskin (D-Md.) complained that Amazon’s Alexa was a monopoly, since it holds a 60% share of the smart speaker market. But if you define any market this narrowly, you’ll find monopolies everywhere you look. If you define your neighborhood as a market, your local gas station is a monopoly. Of course, Alexa devices compete in a much broader market than that; the device competes with smartphones, tablets, and personal computers, all of which conduct most or all of the same functions.

Rep Jayapal (D-Wash.) and Rep. Neguse (D-Colo.) both incorrectly called Facebook a monopoly. Not only is Facebook not a monopoly, they are not even the dominant firm in their market—the largest social media platform is YouTube. Additionally, Facebook’s primary revenue source is advertising. They aren’t dominant in that market either; Google beats them out by a wide margin.

In many areas, we are behind our competitors. The fastest growing app is #TikTok, and the largest messaging app is iMessage.” ~ Mark Zuckerberg

To provide one example, the cost of online advertising has plummeted 40% in the last decade. If Google has monopolistic power in the advertising realm, why aren’t they raising prices? The obvious answer is that there is robust competition in online advertising. Google competes with Facebook, Twitter, Pinterest, Comcast, and countless others for ad revenue. 

“Competition in ads — from Twitter, Instagram, Pinterest, Comcast & others — has helped lower online advertising costs by 40% over the last 10 years, with these savings passed down to consumers through lower prices.” ~ Sundar Pichai 

Democrats were also hostile to acquisitions and mergers, which they claimed were harmful to both consumers and competitors somehow. Rep. Neguse questioned Zuckerberg about acquisitions, condemning how successfully Facebook had acquired and improved various products and services. Never mind that these acquisitions improved the apps’ privacy and security features while making more apps free to the public. If the success of American businesses makes Democrats uncomfortable, then by all means we should let them weaponize antitrust law to beat private businesses into submission.

Those who want to expand government power favor a narrow definition of tech markets because they have no real evidence in terms of demonstrable consumer harm or rising prices. It allows them to build an antitrust case out of bitterness, and little else.

The presence of four companies—all of which compete with each other—should be sufficient evidence that there is no risk of monopolization. Competition in tech—from hardware to software to advertising—is robust. 

Photo Credit: POMED

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