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How to Fix Big Tech Without Breaking It Up

 |  March 24, 2019

Antitrust expert Hal Singer thinks there’s a better way to knock down the internet giants. (Except for Facebook.)

By Joe Nocera, Bloomberg

Hal Singer makes his living as an expert witness in antitrust cases and teaching at Georgetown University’s McDonough School of Business. In recent years, he’s also become one of the handful of economists who are trying to shake up the once-staid world of antitrust theory. He’s testified before Congress, participated in a symposium held by the Federal Trade Commission, and made speeches in which he’s offered his own solution for how to reignite competition in the face of the power of Big Tech. Whether you agree with him or not, his ideas are being taken seriously in the halls of Congress, and have helped spark a debate that could have enormous consequences. What follows is a lightly edited and condensed version of a recent conversation we had about his ideas.

Joe Nocera: I wanted to do this interview because you’ve been very vocal about ideas for preventing the big technology companies — Amazon, Apple, Facebook and Google — from abusing their immense power. Before we get to that, let’s talk a little bit about the current antitrust standard: the so-called consumer welfare standard. Can you start by just explaining what it is?

Hal Singer: The essence of the consumer welfare standard is that antitrust should be motivated to do good by the consumer. So if we see conduct that doesn’t hurt consumers in the short run, then why bother to stop it? The reason the standard keeps an army of economists busy in antitrust cases is that it calls for something that can be measured empirically — namely, price or output effects — usually via statistical analysis or econometric analysis. But as it has become the holy grail, the consumer welfare standard has shrunk the ambit of antitrust to address only those harms that manifest themselves in a short-run price or output effect.

JN:I know you think the consumer welfare standard doesn’t make sense when evaluating tech companies, but what about other kinds of companies? For instance, the AT&T-Time Warner deal?

HS:That’s a tough one. Look at how it affected the Department of Justice in trying to block that deal. It forced the DOJ to put all of its eggs in the price-effect basket. The government felt if it could show that the merged entity would raise prices to rivals to a significant degree, that would get it across the finish line. There were observers like David Dayen who noticed that a bunch of potential harms flowing from discrimination were not pursued by the DOJ. I think the reason is that the agency felt this was their best chance of winning. The consumer welfare standard is lurking everywhere. It is influencing the types of cases the government brings; and it is influencing how it brings them.

JN:So why doesn’t the consumer welfare standard work when it comes to the tech companies?

HS:The potential harms do not manifest as short-run price or output effects. Here’s a way to think about it. Imagine a truck delivering goods to a grocery store. A group of people standing around the truck decide to tip it over, causing all the contents to spill out. The consumers standing around scoop up the contents for free. There is no doubt that under a very narrow interpretation of the consumer welfare standard, if we are just measuring the short term gain or loss to consumers, everybody getting the loot for free is technically better off than they would be if they had gone into the store and had to pay for it. But obviously that shouldn’t be the end of the story. The suppliers need to be compensated, the grocery store needs to put the goods on its shelves, and so on. Their needs can’t be ignored.

When Amazon clones merchandise that a cosmetic company is selling on the site, or when Google clones the reviews of a local search provider — when they engage in these acts of appropriation — it’s not that different. In the case of local search results, Google is effectively giving away something to consumers. Amazon could be lowering the price of its cosmetic clone. An economist who is tied to the consumer welfare standard would say, “How can you be against that?” And of course in the short run, there is a benefit to consumers. I can’t deny that. But if entrepreneurs watching this appropriation decide it’s not worth the effort to compete against the platform and throw in the towel, then how well off is the consumer in the long run?

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