The Big Problem with Big Tech

The Big Problem with Big Tech

The consumer welfare standard was a radical idea when it was first proposed by Judge Robert Bork in the 1970s. Beforehand, when reviewing mergers and acquisitions under antitrust law, judges typically considered an array of factors, such as impact on small businesses and effect on income distribution. In contrast, under the consumer welfare standard, judges refrain from taking actions against mergers of mega-corporations so long as the merger would benefit consumers through lower prices and better services. A brainchild of legal conservatism, CWS’s rise coincides with the Reagan presidency, and is widely credited for economic growth across industries.

Today, the consumer welfare standard, once a decidedly conservative product, has become the new gold standard, applied and lauded by scholars left and right. In 2019, when most conservatives weren't yet focused on tech platforms, the limelight was on then-presidential candidate Elizabeth Warren, who included “breaking up big tech” as part of her campaign platform. “Today’s big tech companies have too much power — too much power over our economy, our society and our democracy,” she proclaimed.

Herbert Hovenkamp, a Wharton antitrust professor, strongly critiqued Warren’s proposal, regurgitating the scholarly consensus that big tech platforms offer lower prices (ex. free shipping via Amazon, free search via Google, and free communication via Facebook) and help small businesses who sell on them. William Kovacic, professor at the George Washington University School of Law, dismissed Warren’s plan as unrealistic. He opined that barring “some cataclysm, some external shock that is a result of a corporate scandal, a further set of revelations that calls into question the legitimacy of the sector,” any plan to break up tech companies wouldn’t materialize.

Then that shock took place. During a once-in-a-century public health crisis, tech platforms pocketed massive profits while small businesses suffered, and engaged in questionable political censorship. In 2020, as they inserted themselves in the democratic process, attitudes changed and appetite for more action grew.  

However, an old-school split-up won’t do much. Tech platforms, unlike 20th century railroads, have no marked physical boundaries. Splitting up Instagram and WhatsApp from Facebook will neither achieve the Left’s desire to micromanage speech nor aid Sen. Hawley’s crusade against “wokeness.” More lawyering up and more internal corporate bureaucracy will be the likely outcome. I won’t belabor Section 230; Cola Buskirk has previously written  an excellent piece on that in the Review. A modern antitrust agenda, generally speaking, should correct current biases in our system and curb big tech’s political power.

We need to first realize that consumers of big tech (i.e. platform users) are not consumers in the traditional sense. Rather, platform users - their time as well as their data - should be seen as intermediaries that help increase the value of tech platform products. In this case, advertisers who pay and make platforms profitable, not everyday users, are the real consumers. Facebook advertisements and Google search results aren’t natural occurrences. They are the results of individualized data collection married with advertisement buying power. With its narrow focus on price and output, the consumer welfare standard misses the marketplace realities for tech platforms and has failed to prevent acquisitions like that of Facebook and Instagram.

In a market economy, public policy should not pick winners and losers. However, the antitrust standard as it stands is biased in favor of not only big tech, but the tech industry as a whole. With virtually zero fixed costs, tech companies can reach economies of scale at a much faster pace than other industries. Thanks to their lack of physical assets, tech companies can easily hide their financial assets elsewhere in the world to avoid taxation. That is not to mention that tech companies may inadvertently harm other industries. Local journalism, physical bookstores, and small businesses, just to name a few, have been decimated by tech companies. It is simply not possible for a traditional business like an energy provider to charge consumers $0 and then hide assets in Bermuda or Ireland, all the while scaling up at a lightning speed. When writing tax codes, legislators should close this loophole by taxing tech companies where their users are, not where they shield their assets.

Unlike other products made available to consumers (insurance, banking services, etc), tech platforms aren’t just tools. They can also be political instruments, an aspect that the consumer welfare standard - which assumes neutrality - fails to address. While other industries can influence politics through lobbying, the control of speech of any kind, not just political speech, is by nature a political act. According to a recent report, more than 95% of donations from Facebook and Twitter employees have gone to Democratic Congressional candidates in the last two election cycles. While individuals are of course free to donate to any candidate of their choosing, it’s hard to eliminate suspicion of bias when a company has so few conservatives or Republicans. The mere potential of speech being controlled by a hyper-partisan demographic should raise serious concerns.

The antitrust problem is a vicious cycle. First, lax antitrust standards encourage corporate consolidation, a process which is hard to reverse. Then, outdated tax codes benefit tech monopolies and create marketplace inequality. Eventually, concentrated economic power, combined with tech products' political nature, leads big tech companies to make more aggressive moves for political power, not just selective censorship and lobbying. Under a loose regulatory environment and a deadlocked Congress, big tech companies might be tempted to impose their own version of public policy, supplanting our elected representatives. Whatever policy agenda big tech puts forth, it won’t be representative of the general electorate. Worse yet, since they are unaccountable to the electoral process, their actions bypass the legislative process and are harder to reverse and amend.

Conservatives, who are disproportionately on the receiving end of big tech’s overweening power, are uniquely suited to tackle this novel problem. Traditional conservative critiques of centralized power, unelected bureaucracy, and infringement of personal rights, transfer naturally to the problem of antitrust. Popular sentiment against these businesses won’t fade away as long as they exercise political power under unfair rules, and it shouldn’t. We make laws to better our lives, and update them when we encounter new circumstances. To meet the challenges of our digital economy, Congress needs to update America’s antitrust laws.

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