Both Democrats and Republicans Want To Break Up Big Tech. Consumers Would Pay the Price.
Always beware of the name given to a piece of legislation. It rarely describes accurately the likely impact of enacting a bill. In fact, statutes often do the opposite of what their names suggest. Take Sen. Amy Klobuchar’s (D–Minn.) proposed legislation named the American Innovation and Choice Online Act. While everyone likes more choice and innovation, this bill would hinder both as it imposes high costs on consumers. In fact, a more apt name for Klobuchar’s bill would be the Anti-Consumer and Stagnation Act of 2022.
Born out of the recent eagerness to expand antitrust regulation, the bill would empower government bureaucrats at the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to bridle the economy’s thriving technology sector with regulations and mandates aimed at making “big” companies smaller regardless of how well a “big” firm is serving consumers. The economics of this idea are all wrong.
The targets of these legislative efforts are some of the most successful companies in our nation’s history, including Apple, Google, Facebook, Amazon, and Microsoft. Klobuchar and company want to break these entrepreneurial successes into smaller companies, all without regard to the benefits consumers reap from vertical integration. Vertical integration is when a company owns multiples stages of production. In competing for customers, firms buy—or sell—different stages to achieve maximum possible efficiencies. To put this reality into perspective, popular services such as Amazon Prime and Google Maps are products of vertical integration and would be prohibited under the new legislation.
Let’s look at some fundamentals. Nobel-laureate economist F.A. Hayek insightfully observed that “economic planning, regulation, and intervention pave the way to totalitarianism by building a power structure t
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