Does anyone truly believe that our government—which consistently creates monopoly privileges for companies with its own cronyism—can be trusted to ensure that private markets remain competitive? Evidently so. Look at the revival of antitrust activities against “Big Tech.” If we follow history, prosecuting disfavored companies won’t result in more competition but less choice and higher prices.
The American Innovation and Choice Online Act was approved recently by a Senate panel. This bill would prohibit a select few tech companies, such as Amazon or Apple, from preferring their own products over that of other competitors using these platforms. Independent merchants selling on Amazon, for example, claim they will be penalized if their products are sold at a lower price on Amazon or other websites like Walmart or Target.
Amazon is believed to control what happens in marketplaces on the internet and make products more costly for all. This is why it seems like the most effective solution would be to ban a handful of big techs.
Although this is not supported by empirical evidence, we shouldn’t assume government can and must prevent it. It is also being examined by Congress and federal agencies as antitrust measures. This assumes that all politicians, bureaucrats and courts have a thorough understanding of every platform and its response to regulation. However, the immense complexity and dynamicity of e-commerce ought to inspire humility in government officials.
Amazon and Apple’s wannabe innovators don’t have a clear explanation as to why many customers, sellers, and platforms continue using the same practices. Isn’t it curious that these same practices are still being used by new sectors of the digital market? Are they aware that even if these practices fail to please consumers, new innovations have huge potential to make a profit.
Dirk Auer, a legal scholar examines the problematic “closed” platforms that are under Congress’ scrutiny and the “open” platforms that lawmakers favor. He wrote that “if recent commentary is to believe,” it is the latter which should win. In order for platforms and consumers to reap the greatest benefits from open platforms, intermediaries must step in. However, this isn’t happening in the digital economy.
This means that if the government “reforms” Amazon it will deprive sellers and customers of the service they truly choose. It is inconceivable for legislators to question this option. Eliminating it will force people towards platforms that are less helpful. Customers have the option to shop from both Amazon and other independent sellers in one location.
For writing RegulatingThomas Lenard says that Amazon may have to make a choice between third-party platforms and Amazon-branded businesses because of this act. In either case, consumers will lose out as choices are fewer and prices will rise. Many small businesses that have built their business on Amazon would also be affected.
Antitrust cases, for all their talk about protecting consumers is rarely about this. Robert Bork was a well-known author long before he became famous for his unsuccessful nomination to the U.S. Supreme Court. Antitrust Paradox. Bork showed that antitrust was used during its first 80-years of existence to suppress competition and shield powerful incumbents from smaller, more innovative rivals.
Since then, research has shown that competition was not the primary goal of the Sherman Antitrust Act (1890) or any subsequent statutes. Protecting politically powerful producers against market competition was the real purpose.
If Sen. John Sherman—after whom Congress’s first antitrust act is named—were really a friend of competition, he wouldn’t have staunchly supported the McKinley Tariff, which Congress passed a mere three months later. This was one of America’s largest tariff increases and was intended to protect powerful companies from rivals.
It continues today. People who call for antitrust regulation revival to “promote Competition” might not be aware that they are inciting cronyism to suppress it.
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