Is Foreign Antitrust Enforcement "Discriminatory" and "Anti-American"?
The House Judiciary Subcommittee on the Administrative State, Regulatory Reform, and Antitrust held a hearing in December on "Anti-American Antitrust: How Foreign Governments Target U.S. Businesses." There was a lot of talk at the hearing about how foreign regulations and regulators "discriminate" against American companies. For example, this is from the opening statement of Subcommittee Chair Scott Fitzgerald (R-WI):
If you want to beat your competitors, one option is to out-innovate them. Another is to regulate them. And unfortunately, foreign governments are increasingly choosing the second option. That is what today's hearing is about, and a growing effort to rewrite the rules of the global economy in a way that punishes success, targets American innovation, and leaves consumers worse off. The blueprint for this effort is the European Union's Digital Markets Act. ... The DMA does not ask whether consumers have been harmed. It does not even ask whether a business has done anything wrong. It asks whether a company is large, successful, and, most importantly, American. If the answer is yes, the rules suddenly change.
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What should concern us most is that this model is now spreading globally. We are seeing it in South Korea, we are seeing it in Brazil. We're even seeing it in countries like Japan and Australia. Different countries, same framework. Laws that single out American businesses, restrict pro-consumer conduct, and hand sweeping power to regulators and bureaucrats with virtually no accountability or due process. The activists behind these proposals call it competition policy, but in reality, it's industrial policy designed to give their own corporations a geopolitical edge.
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Free trade does not mean tolerating attacks on the very principles that created our great economic system. Free trade only works when it is also fair. When foreign governments use regulation to discriminate against American companies, that is not competition, that is protectionism
In reaction to this, I want to start with an issue I have raised before: What exactly do people mean by "discriminate" when they use it in the context of tech market regulation? Are they talking about the intent – objective or subjective – of the regulation (or its enforcement)? Or just the effect of the regulation/enforcement at its most basic, e.g., looking for a disparate impact on American companies? An intent test and an effects test have very different implications.
Fitzgerald calls these regulations "industrial policy designed to give their own corporations a geopolitical edge," and to me that suggests he has intent in mind. I'm not sure the regulations are designed to provide a "geopolitical edge" though. Rather, they are simply the inevitable result of the current state of the tech market. How can you regulate the Big Tech companies at this moment without "targeting" U.S. companies to some extent (in the sense of the regulation having a disparate impact on them)? In the context of this particular sector, "targeting" in the sense of a disparate impact doesn't tell you much about the underlying purpose of the regulation.
In addition, do these regulations really have the effect of giving anyone a "geopolitical edge"? The Europeans do a lot of regulating, but their companies haven't exactly been market leaders and it doesn't seem like these regulations are giving them much of a boost. And while the Koreans have some big domestic companies in this space, their tech sector developed well before any of the regulations under discussion today, so I don't think the recent regulatory efforts can explain their success.
Moving away from the discrimination issue and shifting to a broader analysis of tech regulation, I don't have strong feelings about whether regulations such as the DMA are good or bad in terms of their overall impact on the market. To me, some of the goals seem good, but I'm not sure how well the regulations get us to where people are trying to go. While I'm not a fan of many of Big Tech's current offerings, I'm skeptical that the regulators and antitrust enforcers, in any territory, are going to make tech markets more competitive or otherwise better to any significant degree. But there's a lot of uncertainty about future developments in this sector, and we'll see how it all plays out.
Regardless of whether the regulations are effective in achieving their goals though, I think U.S. and other foreign tech companies should be able to adapt their products so as to comply with whatever it is these regulators want in their markets. Regulations can be a hassle, but as long as they are non-discriminatory (which is obviously a contested issue, but hopefully everyone can agree to make this an evidence-based, case-by-case assessment), it's just something companies have to deal with.
Overall, taking into account issues of discrimination and whether the regulations are "fit for purpose" (as they say), I don't think these types of foreign regulation are something the U.S. government should be as focused on as it is. It's certainly worth monitoring for discrimination, but what we are seeing now seems like an overreaction to me.
More generally on these issues, in the ongoing political battle and/or alliance between Big Tech and Big Government, I don't have confidence in either one at the moment. As I've said before, I think a part of the way to get us to "better tech" is for entrepreneurs to build new platforms that provide a place where people can participate in conversations and view content in ways that work over the long-term, rather than companies just trying to maximize short-term profits through practices such as gathering user data and selling it to advertisers. Basically, I'm hoping for new companies to come along and make the interwebs a better place. I see some people trying, and I'm doing what little I can to help them along.
Going forward, my prediction is that in the tech space, some of the leading U.S. tech companies are going to see a bit of a decline. That's mainly because the quality of their offerings has gotten worse, but various U.S. policies have an impact here as well. That makes this moment in time an opportunity for upstart companies from around the world to pick up market share. We'll see if they are able to take it.
Finally, I will note that some related points at the hearing were raised in the testimony of law prof Roger Alford, who was more skeptical of the Big Tech criticisms of European and other foreign regulations than his fellow witnesses were:
In my view, we should consider the current hearing as another manifestation of efforts to politicize antitrust enforcement. The charge is that Europe is discriminating against American Big Tech companies and that Europeans are enforcing their antitrust laws in an anti-American manner. Who is pushing that agenda before the White House and Congress? Of course, it is Big Tech companies and their lobbyists and surrogates. In truth, American companies are on both sides of European antitrust enforcement, seeking investigations and the subject of investigations. Big Tech lobbyists are asking the Trump Administration and Congress to preference American Big Tech companies over other American companies, including American Little Tech companies competing in Europe.
Much of the antitrust enforcement in Europe parallels antitrust enforcement in the United States. And of course, there is bipartisan consensus in the United States that Big Tech companies are abusing their monopoly power and the Trump Administration as well as dozens of Republican state AGs all have brought antitrust cases against Big Tech companies for their abuse of power. The real concern about Europe is not discriminatory antitrust enforcement but rather that something is fundamentally broken in the European market such that there are almost no European competitors successful enough to be described as Big Tech companies.
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... the risks of discrimination are real, and I witnessed it first-hand. But the risks that Big Tech companies that have achieved gatekeeper status are abusing their monopoly power is also real. Other countries are not acting inappropriately if they are enforcing their laws in a fair-minded and nondiscriminatory way to address competition concerns in their markets, just as our federal enforcers are not acting inappropriately when we investigate foreign companies that are abusing their monopoly power, engaging in price fixing, or seeking to merge in a manner that is anticompetitive. If foreign competitors are harming United States markets with anticompetitive conduct, I hope and assume that federal enforcers will not hesitate to act. In assessing whether there is discrimination, each case should be taken on its own merits.