Today, the Department of Justice (DOJ) begins prosecuting an antitrust case against one of the world’s most respected companies, a key innovator in the artificial intelligence (AI) revolution, and an employer of nearly two hundred thousand employees. Google’s case is not the first, nor will it be the last, victim of an overly aggressive and anti-innovation ideology that is percolating from the White House to the enforcement agencies. The Biden administration has launched an unprecedented antitrust offensive against some of the most innovative and successful American companies: Amazon, Apple, and Meta, to name a few. That’s in addition to aggressive actions against Microsoft in its acquisition of Activision, the Illumina/Grail deal, and the Horizon/Amgen acquisition.
The U.S.’s largest sources of innovation and startup liquidity are facing multiple lawsuits from the Department of Justice (DOJ), the Federal Trade Commission (FTC), and state attorneys general, baselessly accusing them of anticompetitive behavior under radical new legal theories. The Biden administration is attempting to use the hammer of antitrust law to break up these companies or impose severe restrictions on their business practices.
This ideological crusade will hurt the companies themselves, reduce quality employment opportunities, and harm a constellation of suppliers and small businesses that benefit from them. On a national scale, it will also undermine American leadership in new fields like AI and damage our competitiveness with China and other localities. A major portion of the U.S.’s economic prosperity during the 1990s came from an open-minded and innovation-focused government policy towards the then-new internet, including Section 230 and President Clinton’s Framework for Global Electronic Commerce. The rise and promulgation of a World Wide Web unfettered by over-restrictive government mandates led to doubling of annual worker productivity gains during the late 1990s and leading into the early 2000s. While productivity growth has slowed, new technology like AI could lead to another renaissance in productivity and subsequent economic growth for countries willing to nurture this nascent industry.
Even the U.S.’s allies recognize the potential for being the global “winner” of ongoing technological dominance. Earlier this year, the European Union made the first move to raise its regulatory walls against American companies with its new list of “gatekeepers.” Of the six companies designated, only one is not an American company. ByteDance, a controversial Chinese company, also did not have one its main business lines (advertising) designated. Failing to recognize the importance of smart regulation at the cusp of major technological advancements will reduce domestic and foreign investment and utilization of critical strategic industries. Smart policy will lead to better outcomes than simply funneling billions of taxpayer dollars at grant winners that bureaucrats or politicians select.
President Clinton recognized this concept in the 1990s, and the U.S.’s economy, workers, and consumers benefited.
From the Framework:
“For electronic commerce to flourish, the private sector must continue to lead. Innovation, expanded services, broader participation, and lower prices will arise in a market-driven arena, not in an environment that operates as a regulated industry.
Accordingly, governments should encourage industry self-regulation wherever appropriate and support the efforts of private sector organizations to develop mechanisms to facilitate the successful operation of the Internet.”
Another prescient quote from the Clinton White House:
“Business models must evolve rapidly to keep pace with the break-neck speed of change in the technology; government attempts to regulate are likely to be outmoded by the time they are finally enacted, especially to the extent such regulations are technology-specific.”
In stark contrast, the sum total of the Biden administration’s competition policy will harm both the innovation economy and consumers by reducing choices, raising prices, and decreasing the quality of online services on which they depend. This anti-consumer and anti-small business agenda comes at a time of heightened economic anxiety, sky-high inflation, and burgeoning credit card debt.
Earlier this year, a New York Times/Siena College poll found that 78 percent of voters will be voting on inflation. 58 percent of voters rated the economy as “poor.” Against this backdrop, the Competitiveness Coalition/Josiah Bartlett Center for Public Policy’s polling in New Hampshire comes into even starker contrast for GOP candidates in the upcoming cycle:
“Fully 72 percent of GOP primary voters are opposed to the Biden Administration establishing new regulations that would break up large technology companies such as Amazon, Apple, and Google, including 47 percent who are strongly opposed.”
“If these regulations were to go into place, these voters are concerned about the impact they would have on their own lives, including Google starting to charge for their services (34 percent), and Apple no longer being able to ensure the safety and security of downloaded apps (also 34 percent).”
The government’s antitrust cases are based on flawed arguments and radical legal theories. Take for instance the failure of the FTC to even establish the likelihood of anticompetitive harm in the Meta/Within acquisition case.
The presiding judge in the U.S. District Court in Northern California had this to say: "The Court concludes that the FTC has failed to establish a likelihood that it would ultimately succeed on the merits... based on the actual potential competition theory.” This case was largely based on a novel definition of a market promulgated by the FTC wherein there would be harm generated by a concentration within “fitness apps on gaming consoles and other VR platforms, and non-VR connected fitness products and services.” This theory would have completely ignored the overall fitness market, where gyms, pilates classes, cycling studios, and more certainly compete for Americans’ leisure time.
Blocking this deal would have meant that a small startup would not be able to potentially disrupt the entire fitness market through greater access to resources and technical support, while also preventing its founders from accessing liquidity to start their next venture. Imagine if serial entrepreneurs like Elon Musk were prevented from leveraging their successful startups into more startup capital. This would be a grave harm to the innovation economy that the U.S. is world-famous for.
These lawsuits continue a concerning pattern of ignoring the dynamic nature of the tech industry, where competition is fierce and constant. They also disregard the benefits that these companies provide to consumers, such as free or low-cost services, convenience, variety, and security. And they fail to recognize the challenges that these companies face from foreign rivals, especially China, which is rapidly advancing in AI and other strategic technologies.
The Biden administration’s track record of 30 percent win rate in antitrust cases (well below a twenty year historical average of 65 percent) shows that the government’s antitrust theories are not persuasive to judges who apply the law, facts, and precedent objectively. They also show that the government’s antitrust interventions can be counterproductive, as they may prevent beneficial mergers or stifle innovation, while burning taxpayer dollars too.
The current DOJ case against Google is another example of a weak and unwarranted antitrust action. The DOJ accuses Google of harming competition with its dominance in online search and search advertising. But Google’s success is based on its superior technology and user satisfaction, not on any illegal conduct and this position is ever-precarious.
Yahoo once had 64.7 percent of page views in the United States. In 2006, Google and Yahoo were neck and neck with around half of the search market each. Due to strategic missteps, Yahoo now holds around one to three percent of the search market. Today, Google faces intense competition from other search engines, such as Bing and DuckDuckGo, as well as from specialized platforms, such as Amazon and Yelp. Google also shares its search advertising revenue with its partners, such as Apple and Mozilla, who choose to use Google as their default search engine because it offers the best value for them and their users. There’s a reason that a widespread term for online searches is to “Google” it. Right now, the majority of consumers have decided that Google simply offers them the best service and products. This can rapidly change without government intervention since competition moves at a breakneck pace. Breaking up or regulating Google would not benefit consumers or competition; it would only benefit Google’s competitors at the expense of Google’s innovation and quality.
The pending FTC case against Amazon is another example of a misguided and harmful antitrust action. The FTC is expected to file an antitrust lawsuit against Amazon as soon as this month, alleging that Amazon has abused its power in online retailing and digital advertising. But Amazon is not a monopoly; it faces fierce competition from other online retailers, such as Walmart, Shopify, and eBay, as well as from traditional brick-and-mortar stores. Amazon also provides enormous benefits to consumers, such as low prices, fast delivery, wide selection, and customer service. In the immortal words of FTC Chair Khan in 2017, “customers, meanwhile, universally seem to love the company.”
According to news reports, the FTC is planning to launch its fourth lawsuit this year based on a flawed conception of how Fulfillment By Amazon works. Amazon enables millions of small businesses to sell their products on its platform, creating jobs and opportunities for entrepreneurs. Taking on the headaches of logistics and shipping fulfillment to allow small businesses to focus on their products helps get more entrepreneurs on the path to independence. The potential for the FTC to attack this channel for small businesses will only lead to consumer and small business harms. Forcing divestment or other regulatory mandates on Amazon for this business line could lead to Prime deliveries becoming more delayed, drive up average costs for consumers, or increased forcing of small businesses out of business. If Amazon becomes less competitive due to government intervention, it is plausible that foreign competitors like Temu might step in to fill the void. Breaking up or regulating Amazon would not protect consumers or competition; it would only hurt Amazon’s efficiency and innovation, and further damage American companies' competitiveness in a global marketplace.
The government’s antitrust crusade against homegrown companies is bad for the U.S.’s global standing and its consumers. This continued onslaught against innovation will weaken some of the brightest American companies that are leading the world in AI and other strategic technologies. China is actively pursuing tech dominance with massive investments, subsidies, and industrial policies in strategic industries. Under China’s state-controlled economic model, its national interests will continue to govern its antitrust and competition policy. If the U.S. wants to maintain its edge in AI and other fields, it needs to support its free market tech champions, not sabotage them.
The government should abandon its antitrust crusade against tech companies and focus on more constructive policies to promote innovation and growth in the U.S., particularly in AI.
As NTU/NTU Foundation’s Director of Technology Policy & Senior Fellow Ryan Nabil has written, some innovation-supportive policies include:
A flexible and reasonable data privacy law with strong preemption power that harmonizes privacy rules across business sectors and state boundaries. One starting point is the American Data Privacy and Protection Act, introduced last Congress by now House Energy and Commerce Chair Cathy McMorris-Rodgers.
Congress and the Biden administration must refrain from passing a premature comprehensive AI governance statute that could hamstring AI innovation in the long term. Instead, the U.S. needs to adopt a flexible, innovation-focused approach that outlines the government’s AI principles, establishes the U.S. AI framework and creates mechanisms to implement it, and develops measures to promote innovation and mitigate AI risks.
The United States would benefit from more closely evaluating the AI governance strategies of major jurisdictions—like the European Union, the United Kingdom, Japan, and Switzerland—in understanding how best to design a flexible, well-balanced approach to AI.
Given the widely divergent applications of AI to different sectors and business functions, the U.S. should regulate the applications of AI, rather than the underlying technology.
To prevent regulatory fragmentation, the government should propose mechanisms that support the implementation of the U.S. AI framework.
Instead of classifying the use of AI in certain sectors as “high-risk,” the U.S. should consider developing risk assessment frameworks to identify, prioritize, and mitigate AI risks.
The United States should develop mechanisms to seek input from the private sector, academic institutions, and civil society in developing and calibrating AI rules.
Well-designed AI sandbox programs can help improve the regulatory understanding of AI technologies and business models, design more flexible AI rules, and promote innovation.
Designing reciprocal sandbox arrangements with like-minded jurisdictions – such as the UK, the EU, and Switzerland – can promote cross-border innovation and regulatory cooperation.
These policies would help the U.S. to harness the potential of AI for good, while addressing the challenges and risks that it poses. They will also help America to compete effectively with China and other rivals in the global AI race. They will also benefit consumers by enhancing their choices, lowering their costs, and improving their quality of life.
The government’s current aggressive stance against American companies fundamentally contravenes successful decades of competition policy which focuses on consumer welfare and satisfaction. It will hurt companies that both employ hundreds of thousands and empower small businesses, undermine American leadership in AI and other fields, and damage the U.S.’s competitiveness with China. It will also harm consumers by reducing their choices, lowering their quality of service, and raising their prices - all while their budgets are squeezed by economic anxiety and inflation worries.
The government should pivot to constructive policies to promote innovation and growth in the American economy. These policies would help the U.S. to harness the potential gold mine of AI for good, while using a light touch regulatory approach to address the challenges and risks that it poses.
Then-President Clinton saw the strategic national potential of the internet in the 1990s. Now, nearly three decades later, the U.S. again has the opportunity to maximize the potential of a breakthrough innovation to realize massive economic gains, or it can slow progress through a narrow regulatory sieve constructed by academics and bureaucrats.