By Tracy Hernandez and Ahmad Thomas
While this misguided U.S. House legislation targets large tech companies, consumers and small businesses will suffer
As many California businesses continue struggling under the pandemic, members of Congress are pushing for antitrust legislation that would break up digital tools and online services that assist small enterprises. While this misguided legislation targets large tech companies, consumers and small businesses will suffer.
The current package of antitrust bills in the House, aimed at a select number of tech companies, would prohibit certain platforms from promoting their products on their own sites, break up integrated services offered by large companies, and prohibit 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 2 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. Currently, consumers have access to free integrated features such as email, maps, shopping and video streaming under single platforms. These bills would shift traditional focus of antitrust enforcement away from consumer protection toward “business competition.”
Under this legislation, integrated services would be broken up and scattered across the internet. Companies would lose the economies of scale obtained by bundling services. And consumers might face the reality of paying for services that are currently low-cost or free.
California innovation would also be harmed. 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.
Perplexingly, the antitrust bills constrain only U.S. companies, not foreign competitors. The legislation targets a small group of American businesses, all of whom have presence in California. It dangerously puts home-grown companies at a competitive disadvantage against global competitors.
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 such as 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 happens, instead of prematurely banning certain business practices out of fear that they might be uncompetitive.
Business organizations statewide have stood up to urge Congress to reject these bills because they 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. Ahmad Thomas is the CEO of the Silicon Valley Leadership Group.