Summer Reading: Big Tech Antitrust is Big Mistake

As August recess winds down to a close, focus in Washington is shifting to Congress’ likely priorities for the remainder of the year. While Congress inevitably runs into hard government spending deadlines and could instead choose to address rapid inflation, antitrust bills targeting American big tech companies seem to still be a priority for members of Congress. These proposals come in different forms and would have profound consequences for the digital economy.

The primary proposals targeting American businesses are the American Innovation and Choice Online (AICO) Act, introduced by Sens. Amy Klobuchar (D-Minn.) and Chuck Grassley (R-Iowa) coupled with the Open App Markets Act (OAMA), introduced by Sens. Richard Blumenthal (D-Conn.) and Marsha Blackburn (R-Tenn.).

The first – AICO – would prevent companies from preferencing their own products and services. Any effort by a company to utilize or promote its own services on its platforms would be presumed to be unfairly anticompetitive. Examples of this include Apple deferring to ApplePay for payment processing, Google pre-installing Chrome on its smartphones, or Amazon putting their own brands at the top of search results.

The bill would also force covered companies to allow competitors access to their systems and consumer data, in addition to rendering many cybersecurity practices presumptively illegal until proven innocent.

The latter bill – OAMA – would make it presumptively illegal for American tech companies to bar the download or installation of third party apps or even app stores. According to the text of the bill, it would force smartphone providers to make this side loading “readily available” to consumers.

There are a number of concerns with these pieces of legislation. The first, most straightforward of which, is that it puts political vendetta ahead of consumer welfare. There is very little – if any – market demand clamoring for more, unvetted app stores or for adding middlemen to every digital transaction.

Certain smart phone providers do allow side loading and others do not to ensure more protection for their operating systems (more on that later). And tech companies often defer to their own products and services to ensure reliability and to reduce costs. There is adequate consumer choice and a brief glance at the millions of applications available on the current dominant app stores, shows there is no shortage of options coming any time soon.

It is very likely that not only will this fail to help consumers in any meaningful way, but these bills will actively hurt them. Companies save on security costs by ensuring only properly vetted apps gain access to their app stores, and accrue savings by keeping certain operations in-house, enabling them to pass those savings on to consumers. Antitrust legislation making these practices presumptively illegal will complicate their business model and make it more expensive. As a result, consumers will see higher prices in the digital marketplace.

There are also a bevy of security concerns with these bills. A bill like AICO would inhibit companies from using their own payment processing systems, among other prohibitions. Often, companies don’t insist on using their own means because they are monopolistic or predatory. Rather, they do so because those are the means by which they can ensure reliability and safety. When so many monetary transactions take place digitally, it makes little sense to force tech companies to use payment processors with which they’re unfamiliar. It does not engender trust with millions of consumers.

The system access and data sharing provisions of AICO create obvious security risks. Americans could soon find their data they created with American firms shared with foreign “competitors” without their permission.

Further, a bill like OAMA places a sweeping prohibition on banning apps from app stores. This prohibition even incudes potentially dangerous apps. Most prohibitions on apps and app stores are born out of a desire to prevent malware from infecting the devices of millions of consumers across America. A number of national security experts have raised the alarm about this effort on Capitol Hill. It makes no sense to hinder a tech company’s ability to secure its systems – and its consumers – in this increasingly digital age.

These bills would also grant sweeping new authority to the Federal Trade Commission (FTC). They would allow the FTC to initiate antitrust cases against American tech companies and increase the fines associated with such cases. They would also grant FTC broad discretion to determine which cases to take up and when. FTC Chair Lina Khan has a very public history of being politically-motivated. Being subject to the arbitrary whims of government bureaucrats is hardly a recipe for market certainty or stability.

This is also an indication that this will not be the boon for free speech that many right-of-center lawmakers think it will be. In fact, many of the bill’s sponsors are hopeful it will actually empower more censorship online. The bills are modeled after European regulations, which are notoriously censorious in nature. Delusions of AICO and OAMA creating a freer marketplace of ideas are just that: delusions.

Speaking of good intentions backfiring, many of the same arguments being leveled against tech companies today are those that were made in support of the harmful “net neutrality” regulations of years ago. The justifications rest on the notion that social media companies – among other big tech companies – ought to be considered public utilities. These types of regulations, when put into place in 2015, stifled innovation and investment in the economy. Applying those same rules of the road to tech companies today would do the same.

The broader effort to target tech companies with antitrust threats also smacks of political corruption. The criteria to fall under the regulations of these bills is tailored in such a way to include certain tech companies, but not other large companies who typically utilize the same practices. A cursory look at some of those companies will reveal that many of the exempted entities have headquarters in the home states of the politicians sponsoring one or both bills. It is clear this effort is meant to settle political grudges while clearing the path for campaign donors to chew up more market share for themselves.

When speaking about antitrust today, politicians conjure up images of cartoon-ish Gilded Age villains that do not comport with any reality. In fact, however, the targets of this government ire are the tech companies that allow us to order virtually any product under the sun and have it delivered to our door in 48 hours. It is the companies who provide us the phones and social networks that help us stay in touch with loved ones across borders and time zones.

This effort is in no way, shape, or form tailored to meet the needs of American consumers. Rather it is tailored to meet the needs of politicians who want to be able to say they notched a critical win against a seemingly very powerful opponent. That should not be the basis for American governance.