Less Thinking. More Regulation.
US politicians proposed five tech antitrust bills in June. They’re aggressive and ambitious, and contain some important concerns and ideas. Unfortunately, some of them are also pretty naive - case studies in not doing the work.
By Capital Thinking • Issue #886 • View online
“You give me the awful impression, I hate to have to say it, of someone who hasn’t read any of the arguments against your position ever.”
- Christopher Hitchens
Late last year the US congress’s antitrust committee held a series of hearings, and produced a 400 page report, on competition issues around big tech platforms.
The report, co-authored by the new FTC nominee Lina Khan, essentially claimed that these companies are collectively the new Standard Oil, crushing competition and squeezing out innovation across many different fronts.
Unfortunately, this report was also, to be charitable, very rushed, with great chunks of advocacy pasted in without any scrutiny, and with significant errors of fact every few pages.
Perhaps the worst example of this was the claim that tech startup creation has ‘sharply declined’ in the last decade. This is an important claim, and if it was true we would obviously need broad and urgent intervention - but in fact, it was based on a data set that ended in 2011, which was both nine years out of data and just at the end of the financial crisis.
People in tech agree on very little, but everyone would agree we’re in the hottest market for tech startup creation in history - any relevant data would tell you that tech startup creation has actually risen by three to four times in the last decade.
This report has now been followed by five proposed tech antitrust bills, published on Friday.
Given the background, and the current US political environment, these are aggressive. However, like the report, they contain a mix of real concerns, good ideas, and some pretty questionable logic.
The five bills, with their aims, are as follows:
- Merger Filing Fee Modernisation Act: raising funds to pay for more rigorous antitrust enforcement
- Access Act: user data portability
- American Choice and Innovation Online Act: steering and self-preferencing of services
- Ending Platform Monopolies Act: bundling, private label, and platform companies competing with services on their platforms
- Platform Competition and Opportunity Act: a ban on all M&A
Bills 2 to 5 apply to companies that are a ‘covered platform’, which is defined as a company that has either net revenue or market cap of at least $600bn and either 50m US consumer MAUs or 100k US business MAUs.*
Collectively, these bills are a catalogue of most of the major arguments made against large consumer tech companies in the last few years, and of the remedies that have been proposed.
Unfortunately, some of them also show little sign that their authors have engaged with or even read any of the discussion we’ve all had around those ideas. I’ve listed these bills roughly in order of how coherent they are (the first is out of my scope).
No company wants to make it easy for you to switch to a competitor, and many regulators are exploring data portability requirements of some kind, from making it easy to export your photos from Facebook, to moving business operations data between enterprise software tools. So, this bill would require covered platforms to make APIs to let you export your data to another tool in some reasonably standardised way, and give the FTC a mandate to regulate that.
What is ‘data’, though? Four questions:
- First, much of this data is highly specific to a given software company’s product and infrastructure (and its relation to millions of other users), so the practical value to anyone else might be quite limited. Two competing products might create data from customer inputs in unusably differently ways.
- Second, who owns that data, exactly? if I ‘like’ your Instagram photo, is that my data or yours? That doesn’t have a simple answer. How much of ‘your’ data is yours to export?
- Third, how will this work? We don’t know - the bill is 15 page long and punts all the questions to the FTC, which is supposed to just work all this out. So, we have a law that says you must make X portable, without defining X.
- Finally, one could argue that this doesn’t address the most important kind of data - network effects. If I want to compete with Instagram, I don’t just need your photos - I need your entire social graph and all your friends activity (and, to repeat, that’s not ‘your’ data to give me). If I want to compete with Google search, I don’t need your search history - I need raw search and click data for millions of users. That’s where the real competitive value of data lies, and that’s not addressed here at all.
Steering, self-preferencing and competing on your platform.
Google puts its own restaurant data above Yelp in search results, Apple bans Spotify from asking for a credit card or even telling you that’s an option, and Amazon makes private label products that compete with its suppliers.
Platforms compete with other people on their own platform. This is a problem, so we should ban it, right? Well, yes and no.
Photo credit:Nathan Dumlao on Unsplash