Joe Biden sets regulation and antitrust back 100 years

By Mark Jamison of AEI.

"Much of the mainstream media seemed to gush over President Joe Biden’s executive order (EO) ramping up regulation of American business. Headlines claimed the order would “tackle corporate abuses” (Reuters), “boost competition ‘across the board’” (CNBC), crack “down on anticompetitive economic practices” (CBS News), and launch an “assault on monopolies” (Politico).

A Washington Post headline was the most candid, calling this a “battle over who holds power in [the] U.S. economy.” Spoiler alert: Consumers won’t win.

Despite his claims to the contrary, Biden’s policies won’t increase competition or innovation and won’t protect consumers or workers. Instead, they will tilt the economy toward larger businesses via heavier government control.

What does the EO say?

The EO pursues a “Whole-of-Government Competition Policy” by centralizing “Federal Government efforts to address overconcentration, monopolization, and unfair competition” under a newly formed White House Competition Council, comprised of government department heads and independent agency chairs (when invited). The council’s purpose is to coordinate and promote the president’s views on competition and regulation.

Ars Technica appropriately describes the EO as a “grab bag” of actions, including new controls on railroads, prescription drug pricing, airline fees, banks, meat processors, and tech mergers. Parts of the EO are directives to departments the president can control, such as the Departments of Agriculture and Commerce. But the rest calls on more or less independent agencies — such as the Federal Trade Commission (FTC) and Federal Communications Commission (FCC) — to respect the president’s wishes.

How would the EO’s policies affect broadband?

For broadband, the EO seeks to reinstate Obama-era net neutrality regulations for internet service providers, prohibit “unjust or unreasonable” early termination fees for broadband, control how broadband providers offer service information to consumers, and require broadband providers to report prices to the FCC.

It is disappointing to see the potential return of net neutrality — a failed idea whose economic theories are shaky at best and whose effects, according to empirical research, harm just about everyone except perhaps some Big Tech firms and the cottage industry of net neutrality advocates. But net neutrality’s inclusion in the EO isn’t surprising since the term’s originator, law professor Tim Wu, is now a White House economic advisor.

The EO points toward greater broadband price regulation, which would stifle investment and competition. The order’s underlying interest in price controls is built on faulty evidence from a law journal article — apparently never reviewed by an economist — that broadband prices are excessive. The author mistakes spurious correlation for causation, arguing broadband prices are higher in markets with fewer providers due to market power. In reality, assuming the article’s data are accurate, higher prices and fewer suppliers are caused by some areas of the country being more costly to provide broadband than others. That author and the White House ignore evidence that deregulation of broadband prices in the US spurred greater network investment, more subscribers, and lower prices.

How would the EO’s policies affect Big Tech (and small tech)?

The EO vaguely states a desire for greater scrutiny of mergers and for the FTC to become a rulemaking body like the FCC in order to limit tech firms’ data collection and control how e-commerce sites develop and market their own retail products.

As I have explained, more merger controls would result in fewer startups and less innovation, as acquisition by an established firm is sometimes a startup’s goal. Absent such acquisitions, numerous important products might never have existed. For example, Earle Dickson created Band-Aid for his wife’s use. Business development wasn’t his strong suit, so he gave the invention to his employer, Johnson & Johnson, who gave him a promotion and turned the product into a household name. In the tech space, products such as Microsoft’s Disc Operating System, Microsoft Word, Apple’s mouse, and Facebook’s Instagram all originated elsewhere and became business successes via companies with the necessary acumen.

Limits on data collection and retail product development will have similar effects. Fraudulent and deceptive data collection should not be tolerated, but gathering data on users who voluntarily let tech companies record their behaviors should not be restricted. Companies and users should be free to engage in relationships that both deem mutually beneficial (including third-party sellers using a platform to sell their products). As long as e-commerce platforms are honest about their data collection, third-party sellers and consumers alike can conduct cost-benefit analyses of whether to use them.

The bottom line

Biden’s approach to regulation and antitrust harkens back to the populist movement about a century ago that empowered Louis Brandeis’ version of antitrust — a largely ad hoc, “big is bad” approach that hastened the regulatory state’s emergence. As I have written, more regulation results in larger firms and fewer successful startups. Thus, if the president really wants more competition, he should emphasize less government control of markets and business."