Why Conservatives Should not Sic Antitrust on Silicon Valley

It is not surprising that Left-liberals are calling for more government power to regulate and break up information technology companies, particularly when, like Franklin Foer, they worked in industries disrupted by those companies. But it is disheartening to find that the some on the Right are joining the interventionist chorus. To be sure, Silicon Valley leans left on everything but government regulation. It is not clear that this exception is just hypocrisy driven by self-interest or reflects the general political truth that people tend to be most conservative on matters on which they are most knowledgeable. But the Right should be grateful that Silicon Valley, unlike Hollywood and the mainstream media, is an ally on one issue.

Arguments that antitrust rules should be changed to apply to dominant tech firms and not just firms engaged in “monopolization”—the term actually used in the Sherman Act—would both weaken our economy and, even worse, allow government to harass firms based on a vague and manipulable standard. Even beyond the statutory language, there are very good reasons that the law requires the government, before it can apply sanctions, to show both that a firm exercises monopoly power and engages in exclusionary conduct unjustified by a substantial business practice.

First, the desire for a monopoly is not itself a bad thing.  It encourages great effort that pays off in innovation for consumers. Second, determining when a firm has substantial power in the marketplace is very difficult. We want to have a high bar lest the government mistakenly harm firms that have no substantial effect on the economy’s allocative efficiency and use a lower standard to go after firms it dislikes for political reasons. For instance, Amazon may be a dominant firm in online shopping, but it does not have a monopoly in the relevant market for almost any good, because it still represents a relatively small percentage of total sales. And while Google’s firing of the engineer for his diversity heresy was wrong, it was not an exercise of economically worrisome power, because Google has no monopsony power in the market for computer scientists.

When it comes to information technology firms, it is likely that firms do not possess enduring dominance because new technological paradigms will come round to disrupt them. The Justice Department sued IBM as a monopoly, but dropped the lawsuit shortly before PCs allowed Microsoft to eat IBM’s lunch. Then the Department sued Microsoft shortly before the rise of the Internet made Google the more important gateway to the high tech world. It was not the antitrust suits that prevented entrenched monopoly but the relentless progress of computation and the new opportunities it offered.

And the tech giants are now competing with one another for the new paradigms, like augmented and virtual reality and voice boxes (see Siri, Alexa, and Google Home) that will become the new portals to a world of communication. Even within our current paradigm, the tech giants are vigorous competitors for eyeballs, ads,  and sales.

I would not even put my money on these firms to be dominant in the next paradigm. As firms get bigger they become by necessity more bureaucratic and less nimble. Somewhere in Silicon Valley a group of young techies with visions of creating their own monopoly is planning to do to them what Bill Gates, Larry Page, and Sergei Brin did their forbears—much to the benefit of the rest of us.

In a subsequent post, I will discuss why antitrust law rightly requires exclusionary conduct without substantial business justification before attacking even those who have monopoly power.