As many California businesses continue to struggle under the pandemic, certain politicians are pushing for a suite of antitrust legislation that would break up the digital tools and online services that assist small enterprises. This misguided legislation may target large tech companies, but consumers and small businesses will suffer.
The current federal package of antitrust bills is aimed at a select number of tech companies and would prohibit certain platforms from promoting their products on their own sites, breaking up integrated services offered by large companies and prohibiting mergers of a certain size.
California businesses are uniquely vulnerable to this legislation. Our tech industry supports more than 1.8 million jobs and accounts for more than a quarter of America’s nearly $2 trillion innovation economy. For example: Many of the two million businesses that use Amazon as a sales channel would lose customer access. Local restaurants would no longer appear on Google maps or in business reviews because those features would be considered as unfairly competing with rival services.
Golden State consumers would also suffer. Historically, antitrust policy has focused on protecting the consumer, including access to and costs for service. Presently, consumers have access to free integrated features like email, maps, shopping and video streaming under single platforms. These bills want to shift antitrust’s traditional focus away from consumer protection toward “business competition.” Under this legislation, integrated services like those above would be broken up and scattered across the internet. Companies would lose the economies of scale of obtained by bundling services and consumers may face the reality of paying for services that are currently low-cost or free.
California innovation will also be harmed by this legislation. Barring mutually beneficial acquisitions of companies by other companies would make starting a new venture less attractive. Entrepreneurs would find it significantly more difficult to reach a profitable exit for their startup. The result: fewer startups, depressed startup investment and disincentivized new company formation, job creation and innovation.
Ensuring a competitive playing field in U.S. markets must remain an important goal in our economy. These bills start from the false premise that large companies inherently harm competition. In truth, many smaller companies rely on these larger companies for the platforms and services that allow entrepreneurs to build products and markets.
Consider an artisan selling handmade utensils on an e-commerce platform. The maker sells unique goods, while the platform also sells its own utensil brand. Each sells goods to consumers on the same site. The artisan is in a better position selling on the site than not, because they have access to a global market that they otherwise would not.
If Congress is serious about protecting fair competition, a better approach than the proposed legislation would be to strengthen agencies like the Department of Justice and Federal Trade Commission. Help them better perform their mandated functions of prosecuting anticompetitive behavior when it occurs. This measured approach would address improper business activity when it actually happens, instead of prematurely banning certain business practices out of fear that they may be uncompetitive.
Business organizations statewide have stood up to urge Congress to reject these bills because the legislation would strip U.S. companies of their ability to deliver integrated consumer products and services, ban mutually-beneficial startup acquisitions, and take steps toward breaking up our leading innovators.
Our Golden State has the largest Congressional delegation in the nation. The delegation should protect California consumers, businesses and innovators by rejecting the flawed antitrust legislation. These bills are bad politics and policy. They risk handicapping our economic recovery, harming consumers and undermining California’s business competitiveness.
Tracy Hernandez is the Founding CEO of the Los Angeles County Business Federation “BizFed.” Ahmad Thomas is the CEO of the Silicon Valley Leadership Group.