Promote Competition without Punishing Success

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The “break-them-up” crowd does not grasp the negative consequences of sweeping anti-tech actions.

With declining public sentiment about the tech industry and its impact on society, we’ve witnessed a growing chorus of advocates and policymakers arguing that now is the time for the federal government to take drastic action. Indeed, half of Americans now favor breaking up and more strictly regulating major technology companies, while only 11% think the companies should be regulated less.

This punitive sentiment has been on full display in the House Judiciary Subcommittee on Antitrust, Commercial, and Administrative Law, which has undertaken a year-long investigation of Big Tech, recently bringing together a hearing with the CEOs of Google, Apple, Facebook, and Amazon. The effort reached its conclusion on Tuesday, with the publication of a 449-page report (as well as a shorter minority report) making recommendations for substantial legal changes that could pave the way to broad new enforcement and regulatory actions.

The committee’s effort has taken a great deal of time and thought, and in that respect is commendable for how Congress should approach issues of this complexity and magnitude. There are also some good ideas in both reports, like promoting data portability and interoperability, and making our antitrust agencies more capable. Yet, I also worry the committee’s effort fundamentally gets its premises wrong, fixating on four companies with little in common but their size, and pursuing them with a single-minded focus worthy of Captain Ahab.

As a former YCombinator-backed startup founder and Senate committee staffer, I fear these “break-them-up” factions—from Sen. Elizabeth Warren to Tucker Carlson—are embracing the wrong idea about what American innovation and competition policy should strive for, and being altogether too dismissive about the likely negative consequences for the rest of the innovation ecosystem if they prevail.

I get the emotional appeal—as trust in institutions and actors big and small collapses, there’s something satisfying about knocking today’s Tech Titans down a peg. Perhaps particularly so for conservatives, who fear their viewpoints are no longer tolerated in a digital public square managed by San Francisco liberals.

But the U.S. government shouldn’t aim to punish founders and entrepreneurs for being too successful, regardless of their ideological leanings. Good competition policy should help every company—from incumbents to startups—be more productive, create jobs, and operate in a competitive market under clear rules. What we really need is a policy framework that helps all companies grow better, rather than arbitrarily punishing the top few.

Instead of seeking to break up or otherwise enforce heavy-handed action against a handful of big firms—tying up all sides in years of costly litigation—what if the better choice is to pursue regulatory reforms that would improve competition up and down, from market-dominant incumbents to scrappy startups?

What choices am I talking about exactly? One view, from Stanford’s Mark Lemley and Andrew McCreary, argues that the blunt instruments of traditional antitrust remedies are too hard to get right, and too costly to mess up. Even if we did break them up, we could be facing a new set of Big Tech firms a few years later. Instead, they argue that systemic incentives that drive concentration should be addressed directly through regulatory changes.

Anyone who’s watched the startup market in recent years knows that Lemley and McCreary have a point. Even if you can come up with a substantially better product than Facebook or Google, given the scale of these platforms and barriers like network effects, one’s prospects at an investor pitch meeting wouldn’t be strong, if you could even get a venture capitalist to take your call. Instead, structural incentives push founders to pursue quick payoffs by getting acquired by larger firms (which can then absorb or kill the acquisition), or even designing their startup with this in mind from day one. In a longer paper, Lemley and McCreary spell out some policy “carrots and sticks” to address this that are well worth exploring.

Another interesting regulatory reform approach to promoting tech competition comes from Cory Doctorow, who argues for policy changes to enable permissionless competition. Doctorow’s argument harkens to a prelapsarian technological world (i.e. the 1980s and 1990s) in which there were fewer policy barriers to new firms entering the market and competing with, or augmenting, the offerings of larger firms without their permission. Think of the third-party cartridge maker who’s producing toner cartridges for your name-brand laser printer, or the mobile-phone spare-parts company that’s producing replacement screens for your unhappily fractured iPhone. That’s competition that pushes prices down, and gives consumers more options. Similarly, in the online platform space, the now defunct startup Power.com would have let users have more control over their social media feeds by aggregating them in one place, until a lawsuit by Facebook shut it down.

Doctorow’s key point is that competition enabled by interoperable systems ought to be something that’s encouraged, rather than hindered, by our policy frameworks—in particular, overbroad intellectual property laws and the Computer Fraud and Abuse Act. Fixing the anti-competitive effects of these laws would have to be a part of a public-policy commitment to establishing an “interoperator’s defense,” offering a unique approach to driving both the creation of new public-facing businesses and the revitalization (through competition) of older ones.

There are numerous approaches like these that aim to promote innovation and competition system-wide, outside of seeking forced breakups. Such approaches warrant greater discussion and scrutiny in Congress and the administration, which has been altogether too fixated on a few prominent firms, and the emotionally satisfying but imprudent call for breaking them up.

Garrett Johnson is a co-founder and executive director of the Lincoln Network, a nonprofit working to bridge the gap between Silicon Valley and DC. He also co-founded SendHub.com, a venture-backed YCombinator startup.

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