Washington is trying to create true tech monopolies

By Mark Jamison

Some members of Congress, the White House, most federal and state antitrust regulators, and a number of pundits are pushing a narrative that Big Tech is five abusive monopolies — Facebook (now Meta), Apple, Alphabet (Google), Microsoft, and Amazon — that need to be reined in. As I have written before, they are wrong: There is actually intense, dynamic rivalry between these five companies and between them and a number of smaller companies.

But there is great irony in Washington’s rhetoric and proposed solutions: The “solutions” could create actual monopolies where none exist today.

Consider the misnamed Ending Platform Monopolies Act introduced by Rep. Pramila Jayapal (D-WA). According to the press release, this bill would make “it unlawful for a dominant online platform — such as Google, Apple, Amazon, and Facebook — to simultaneously own another line of business when that dual ownership creates a conflict of interest.” “Conflict of interest” means a store like Trader Joe’s selling its own products alongside rivals’ products. The bill would require companies like Alphabet, Apple, Amazon, and Meta to either quit selling their own products or quit selling others’ products.

US Representative Pramila Jayapal (D-WA) participates in a television interview at the US Capitol in Washington, DC, November 4, 2021, via Reuters and Elizabeth Frantz

This would be bad news for small businesses that use Amazon. Before examining how and why, let’s first consider how small businesses use platforms. According to Insureon, 24 percent of small businesses sell on Amazon, which is more small businesses than are selling on any other platform: 22 percent use eBay, 7 percent use Shopify, 4 percent use Etsy, and 2 percent use Alibaba.

Data Catalyst adds that the typical small or medium business uses five different sales methods: 87 percent of sellers on Amazon “also sell on at least one other online marketplace, including 54% also selling on Walmart’s marketplace, and 50% also selling on eBay.”

What does this mean for the impacts of Rep. Jayapal’s bill? If Amazon stopped selling its own products, it would look like eBay. But differentiation is critical for survival in digital markets, so only one of the two platforms would survive, leaving the small businesses with one choice where two had existed before.

Something similar would happen if Amazon complied with the law by ceasing to let small businesses use its platform. eBay would dominate for small businesses given that three times as many small businesses use eBay over its next largest rival, Shopify. Rep. Jayapal’s bill would be a gift to eBay, which would become even more of a monopoly than is Amazon.

Consider also the poorly named “Open App Markets Act,” introduced by Sens. Richard Blumenthal (D-CT), Marsha Blackburn (R-TN), and Amy Klobuchar (D-MN). It largely targets Apple, prohibiting the inventor of the modern smart phone from continuing to provide the simple, seamless, secure customer experience it is known for. More specifically, the bill would ban Apple from requiring that app providers use Apple’s payment system and not cannibalize iPhone value by offering lower prices on other payment systems. Bad apps could also bypass app store safety measures and load directly onto the iPhone. The bill would also require that Apple permit other app stores on the iPhone, also making the device less secure.

One irony of the Open App Markets Act is that it would make the app ecosystem less open by effectively making Apple’s iPhone more like Alphabet’s Android system, which already offers features similar to those required by the bill. This forced change in the iPhone would harm the 113 million US iPhone users that prefer today’s iPhone features. Making the iPhone less secure would decrease many users’ willingness to try new apps. And it would diminish the vibrant competition between Apple and Alphabet for app developers by removing developer options. Finally, by making the two operating systems more similar, it puts at risk their rivalry: As in the case of forcing Amazon to be more like eBay, it is hard to maintain competition between two very similar products in a digital market.

As my AEI colleague Shane Tews recently explained: “There is a problematic gap between some lawmakers’ understanding of the tech sector and their relentless desire to regulate it.” Lawmakers should not make critical decisions about product design, security, and business structure. If they continue on the paths they are on, they might also kill competition.

(Disclosure statement: Mark Jamison provided consulting for Google in 2012 regarding whether Google should be considered a public utility.)

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