Politicians hate Massive Tech, however they haven’t defined why massive is unhealthy

The American political class is increasingly skeptical of big tech. Both right and left are dissatisfied with Alphabet (the parent company of Google), Amazon, and Facebook, to name a few. A House subcommittee has just completed an antitrust investigation into these companies, and laws to curb their market power are in preparation. Efforts to contain big business may be the highest since the golden days of trust shattering more than a century ago.

There is only one problem: no one has explained why size is bad.

American antitrust law has long been a quagmire of vague complaints and unclear terms. We are still missing a clear definition of such basic terms as “monopoly” and “trade restriction”. As with many trusts in recent years, the criticism of Big Tech is often contradictory. Some condemn them for being monopoly. Others complain that they are too competitive and crowd out other companies. Well what is it

In contrast to the law, the economic situation is clear. “Market power” means the ability of companies to charge prices above marginal costs. This enables companies to make excessive profits through underproduction and excessive demands. In an industry where one or more companies have market power, their profit-maximizing production and pricing strategies make the rest of society poorer.

Is this what big tech does? Some say so. But it just isn’t true. Instead, the most plausible complaint against big tech is the opposite: thanks to continuous innovation and price reductions, they have a large market share. But they only secured this large volume of business by making better and better deals to consumers. If this is not competitive behavior, what is it?

The truth is, competition is a much tougher weed than our antitrust fighters assume. The economic theory of “contestable markets” tells us that the threat of competition without legal entry barriers can force even dominant companies to behave competitively. Companies that do not manufacture and price competitively will not have a large market share for long.

This brings us to one of the predominant paradigms in antitrust law, the much maligned “consumer welfare” standard by Judge Robert Borks. Critics of this doctrine, who today are just as likely to call themselves conservative as they are liberal, condemn Bork for his legal activism. But Bork had no choice but to break new ground in the face of the incomprehensible jumble of contradictions that he found.

Bork understood the law to protect consumers. If that’s not the right ending to antitrust law, fine. It is not the judges who are to blame for this, but the legislature. Politicians should write understandable antitrust laws.

To be clear, there are serious arguments that big business is socially dangerous. One of them is that big business inevitably means great political influence. Big Tech has not covered itself with fame here. For example, when Facebook became dominant on social media, it called for more regulation, knowing it could manage costs more easily than any emerging competitor. Far-sighted lawmakers, well aware of the dangers of lobbying mega-corporations, may want to nip the problem in the bud by shrinking the business to size.

It is important to maintain a level playing field in the markets and democracy in government. With that in mind, there should definitely be a national big tech talk. Unfortunately, we have more shouting than conversation.

It is time for lawmakers to come up with a plan to curb the excesses of big business, complete with an explicit rationale and an actionable standard. If they can’t, we are entitled to conclude that their crackdown on big tech is nothing more than political talk.

Alexander William Salter is an economics professor at Texas Tech University and a research fellow at TTU’s Free Market Institute. He wrote this column for the Dallas Morning News.

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