Since the House Judiciary Antitrust Subcommittee released its Investigation of Competition in Digital Markets majority staff report in October 2020, Washington, D.C., has been embroiled in conversations regarding the potential overhaul of antitrust legislation. The U.S. Chamber addressed the majority report’s erroneous conclusions and flawed logic last year.
Now though, as the House and Senate race to finish their legislative agendas prior to the midterm election, the American Innovation and Choice Online Act (AICOA), continues to be pushed by those looking to advance a deeply flawed government-knows-best agenda.
AICOA has raised major concerns across diverse industry groups and the political spectrum regarding its impact on issues such as national security, privacy, consumer choice and benefits, and America’s economic competitiveness. It is also an overzealous regulator’s dream. That is why individuals and organizations such as President Obama’s Secretary of Defense Leon Panetta, distinguished fellow in economics at the Heritage Foundation Stephen More, the Progressive Policy Institute, more than 175 state and local chambers of commerce, and the Wall Street Journal Editorial Board all oppose the bill.
A Flawed Premise
Underlining the feverish rush to pass AICOA without proper legislative scrutiny is an assertion that the American tech sector – and the entire American economy more broadly – has become overconcentrated and uncompetitive. That assertion, however, is just plain wrong.
In March 2022, NERA Economic Consulting published a study that found not only has industrial concentration in the U.S. declined since 2007, but also that in limited sectors that have seen a rise in concentration there is an increase in market output—a sign of competition, not harm to competition. Further, these sectors show positive correlations with an increase in job creation and employee compensation.
Moreover, one would expect that if there were considerable harm to consumers from the technology sector that legislation to further regulate and constrain it would be high on voters’ priorities list. It is not. In fact, a poll released by the U.S. Chamber in partnership with AXIS Research found just the opposite: 70% of voters oppose Congressional proposals to add new antitrust regulations for technology companies.
Why might this be? Well, as Congress’ own non-partisan research arm, the Congressional Research Service (CRS), has found in its analysis of the bill, this legislation would limit popular practices that consumers widely support such as Google embedding Google Maps support on its website or Amazon’s preferred shipping options.
Too Broad and Too Vague
AICOA is a significant departure from the history of American antitrust legislation which has long been based on the consumer welfare standard. Only when consumers, not competitors, are negatively impacted in terms of price or service is antitrust enforcement appropriate. That consumer-based standard has allowed the United States’ private sector to lead the world in technological innovation and investment.
As found in a report the U.S. Chamber published this year, departing from the consumer welfare standard as other markets have done would have real world negative impact on American economic competitiveness. The aforementioned analysis from CRS highlights, “The prohibitions [in AICOA] would move significantly beyond existing antitrust doctrine and could have important ramifications for the shape of the digital economy.”
The shape of the digital economy should be determined by consumer choice and competition. But, under AICOA, its federal bureaucrats at the Federal Trade Commission and Department of Justice, who would have immense power to:
- Decide what is and what is not lawful.
- Decide who law applies to and who it does not.
- Decide how broadly to apply the law across a captured enterprise.
- Define the penalty for breaking the law.
- Break their own rules regarding enforcement of the legislation.
- Define what is and what is not data.
Unelected bureaucrats should not have the authority to determine what products and services consumers can choose from in the market. In our economy, we do not arbitrarily punish success by targeting companies, and we do not look to the government to pick winners and losers in the market.
Given AICOA’s significant and numerous flaws, it is no wonder that there are a number of diverse voices who oppose its passage. America was built on competition—the idea that anyone can bring an idea to market, compete, and succeed or fail based on merit. Congress would be wise to remember that market competition not government regulation, is the fuel of American innovation.
Sean Heather is Senior Vice President for International Regulatory Affairs & Antitrust.