The HJC Report on the Future of the U.S. Competition System: Part 2 (Experts’ Reactions)
The House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law recently published a Democrats-only supported Report (which is being covered in greater detail in additional posts in this ongoing series on DisCo) compiling the findings of a Congressional investigation prompted by anonymous claims into competition and only a few selected digital services.
While the Democratic Staff report does make certain positive suggestions — increased funding for the FTC and DoJ, greater data collection and more frequent studies and retrospectives, and proposals for how to increase data portability — it relies on specious claims, utilizes old or inaccurate statistics, and proposes policies that would be damaging to consumers and businesses alike in the tech sector. Most significantly it fails to account for the market dynamics that characterize digital markets. As a result, the Democratic Staff report assumes certain market shares for investigated companies in markets that are not necessarily defined according to antitrust economics e.g. two-sided market economics. A clear example of how the Democratic Staff report contains crucial flaws is the assumption that Amazon holds a market share of 50%, which is clearly flawed, and casts doubt on the report’s other findings. This is why it is not surprising to see many experts raising questions with regard to the factual accuracy of the Democratic Staff report, and trying to set the record straight.
A recent newsletter from digital media and technology analyst Benedict Evans discusses deficiencies of the Democratic Staff report. In the newsletter, Evans argues it is “sloppy”, citing a lack of deeper analysis or evidentiary support for the Democratic Staff report’s claims. For example, according to Evans:
“It’s a central contention that the dominance of big tech companies has led to a decline in startup creation and VC investment – yet the footnote for this is a report written in 2013 that uses a data set that ends in 2011(!), and in fact PitchBook/NVCA data shows that VC deal flow rose 4.5x in the last 15 years. After acknowledging that most analysts put Amazon’s share of e-commerce at 40% or so, we’re told ‘50% or higher is more credible’, seemingly just because they prefer that. ‘”
A Stratechery article by Ben Thompson also highlights the Democratic Staff report’s lack of evidence for its concerns about monopolies in the tech sector. Thompson outlines how that historical animosity for monopolies has expanded into hostility towards larger businesses in general. Thompson points out that this hostility and distrust towards certain technology companies is one foundation for the Democratic Staff report’s inaccuracies, stating that “monopolies were asserted with effectively zero evidence, and there was little to no mention of the positive impacts of these companies.”
A Twitter thread from Alec Stapp, Director of Technology Policy at the Progressive Policy Institute, points out some of the more glaring unfounded claims. For example, Stapp addresses the Democratic Staff report’s claim that “a decade into the future, 30% of world GDP may lie with [Amazon, Apple, Facebook, and Google] and just a handful of others.” As Stapp points out, the source for this claim is a McKinsey report, which says 30% is literally all business to business and business to consumer commerce globally, not just the leading companies and “a handful of others.” He also responds to the Democratic Staff report’s claim that Americans distrust tech, noting that the Democratic Staff report cites one poll showing that Americans are concerned with how much data Big Tech has and that they want more government regulation. However, this is at odds with the bulk of polls showing that many Americans approve of and trust tech companies. [1, 2]
In an MIT Technology Review article, Stapp dives further into the Democratic Staff report’s misconceptions concerning competition in the tech sector, harm to consumers, and the benefits many of the companies who were the focus of the Democratic Staff report provide.
“To put in perspective how misleading the Democratic Staff report’s original claim was, consider that the combined annual revenue last year of Amazon, Apple, Facebook, and Google represented only about half a percent of global economic output. Such a blatant error is conceivable only in a piece of work that first assumed its conclusion (“Big Tech is taking over the world”) and worked backward from there. There are dozens of other examples like this.”
Stapp continues, outlining how the leading tech companies produce enormous benefits for competition and consumers, which the Democratic Staff report ignores or glosses over. He also addresses the Democratic Staff report’s concerns that smaller firms are unable to compete citing that “Scott Kupor, a venture capitalist at Andreessen Horowitz, pointed out, startups have been booming over the last 15 years in the US.”
The above reflections on the Democratic Staff report make it clear that any changes to the U.S. antitrust system require further analysis than has been presented. One aspect clearly lacking in the Democratic Staff report that requires further study is the market dynamics of the tech industry. Finally, of paramount importance is that before engaging in any changes to the antitrust system, legislators should ensure that no proposed amendments will harm consumers, businesses, or innovation.