California’s War On ‘Big Tech’ Hits Consumers Instead

This op-ed was originally published in Orange County Register.

The digital world can appear to be an extraordinarily novel domain. And often, it is—a fact to which the newest artificial-intelligence, virtual-reality, and advanced-computing technologies testify. Just as often, business models and business practices employed online closely resemble models ubiquitous offline. Critics of the boogeyman “Big Tech,” many of whom have recently acquired a taste for technocracy, strive to portray digital platforms as completely different from their offline analogues—and, consequently, a worthy object of interventionist regulatory schemes. “Self-preferencing”—by which the proprietors of online platforms give special prominence to their own services or products—provides an object lesson in this phenomenon. A bill introduced recently in the California legislature by Sen. Scott Wiener, D-San Francisco, one of the Golden State’s legislators most unfriendly to free digital markets, would prohibit designated large platforms from engaging in the practice. 

To regulate online commerce sensibly, policymakers ought to look to the essence and effects of digital business practices and renounce proposals predicated on shortsighted or opportunistic naming conventions. But Wiener—and, indeed, self-preferencing’s opponents in general—overlooks basic facts of the digital economy and, to justify his sweeping regulatory proposals, attaches ominous labels to ordinary conduct.

Adjectives such as “anticompetitive” are often attached to the activities of disfavored companies—despite the benign or, often, outright pro-consumer or pro-competitive, nature thereof. Wiener’s press release reads: “For years, giant digital platforms like Apple, Amazon, Google, and Meta have used their immense power to promote their own products and services while stifling competitors.”

This much is true: Amazon places its Amazon Basics offerings at the head of its search results; Google Search often does the same for Google Maps, Google Flights, and Google Weather results; and so forth. However, brick-and-mortar stores do business in similar fashion, yet no legislator or enforcer has thought to police department stores’ or grocers’ prominent placement of in-house brands and labels.

Self-preferencing bans do not forbid anticompetitive conduct; they forbid online platforms from engaging in what would, in another context, be considered business as usual.

Moreover, self-preferencing bans overlook the benefits consumers derive from the practice. As the Taxpayers Protection Alliance wrote in 2022, it “provid[es] platform owners with increased revenue and traffic, consumers with cheap products from a trustworthy source, and—once the public gets a taste for a good or service initially popularized on a large platform—smaller competitors with an increased demand for their products.” Competition unfolds not only between like products but within broader constellations of products, platforms, and consumer preferences. Amazon Basics might crowd out a third-party competitor, but Amazon’s self-preferencing search algorithm in most cases conduces to greater consumer benefits and more dynamic digital markets. It’s time to do away with the mode of thinking that considers competition policy in its minute particulars with no regard for the larger forces in operation.

Wiener’s bill is not sui generis; it mimics provisions of the American Innovation and Choice Online Act (AICOA), a federal bill which foundered in the 117th and 118th Congresses and which its sponsors, perhaps having become wiser, have thus far declined to re-introduce in the 119th. AICOA, in turn, would import the principles of the European Union’s Digital Markets Act, a prospect that ought to worry anyone who does not wish for American innovators to follow the continent into a regulatorily induced technological irrelevance. 

A knowledge of markets—whose workings are driven on by impersonal forces, beyond the comprehension or dominion of any single person or council whatsoever—chastens ambitious policymakers. Allowed free use of their property and the liberty of contract, alert entrepreneurs and innovators—within a landscape of competitive pressures and consumer choice—discover new means of serving their customers, never before dreamt of by the would-be central planners of Sacramento or Washington, D.C.