Why Republicans Must Rethink Antitrust
For the first time in a century, Republicans find themselves on the brink of an antitrust revival, a new trust-busting era in the tradition of the Boston Tea Party, Teddy Roosevelt, and John Sherman (yes, the senator who gave his name to our nation’s founding antitrust law was, in fact, a pro-Lincoln, anti-slavery Republican from Ohio).
Why now, you ask? Consider some seemingly unrelated stories that unfolded over the past year.
Story 1: Hunter Biden’s Laptop
In the first story, a computer repair store owner from Delaware approached Trump ally and personal lawyer Rudy Giuliani with a laptop purportedly owned by Hunter Biden, the son of then-presidential candidate Joe Biden. The laptop’s hard drive contained thousands of texts and photos belonging to Hunter Biden, most of which were embarrassing but some of which pointed to deep and troubling financial ties between Hunter Biden and foreign governments, including China. The mainstream media and dominant internet platforms avoided covering the laptop story, citing their hacked-materials policies and unfounded suspicions that the Russians were behind it.
The one exception to this media response was the New York Post, one of the oldest newspapers in America, which ran the laptop story in-depth. In short order, Facebook and Twitter responded to the New York Post’s exclusive by blocking the newspaper’s accounts on their platforms, severely limiting its broader distribution online.
Neither Hunter Biden, the mainstream media, nor the Big Tech platforms have since come forward with any credible evidence supporting their actions.
Story 2: January 6th Protests
The second story goes something like this: in the days following the January 6th protests at the United States Capitol, Twitter, Facebook and other leading internet platforms deplatformed the President of the United States. Big Tech also stepped in to block President Trump from reemerging elsewhere on social media. The platforms, citing concerns about the role Parler may have played in the January 6th protests, set about throttling Parler from the marketplace.
Both Apple and Google banned it from their app stores and Amazon cut off Parler’s AWS cloud services. Ironically, subsequent court filings produced by the FBI in connection with January 6th reveal that Facebook -- not Parler -- was instrumental in planning the events on that day.
Story 3: Georgia Election Law
In April of this year, the Georgia State legislature passed a new election integrity law, S.B. 202. The law immediately created controversy, even though it contained less restrictive provisions than several other existing state laws, including New York’s. Democrats in Georgia and nationally characterized the new law as “Jim Crow” in both its scope and intent.
Corporate America quickly sided with the Democrats and issued strong statements condemning the legislation, in some instances without having read it. Georgia-headquartered companies, including Delta Airlines and Coca Cola, issued statements condemning the Georgia legislature. Major League Baseball announced that it would relocate the 2021 All-Star Game and the MLB draft out of Atlanta. The CEOs of approximately 100 companies openly discussed their collective efforts on a subsequent Zoom call. They vowed to stay in touch regarding plans in other states to update their election integrity laws.
Story 4: Facebook Censors President Trump
Finally, we come to the most recent story—the decision from the Facebook Oversight Board to permanently ban President Trump from Facebook and Instagram. This decision from a private, unaccountable, globalist board with unapologetically left-leaning political views concluded that a U.S. President had incited violence and therefore should be deplatformed.
All this was done without reference to U.S. law or sovereignty. Further, the oversight board sent its decision back to Facebook—hardly an independent judge—for further review and a final decision.
And what was Facebook’s final decision?
Ban President Trump, a former president and potential future president, for 2 years.
This whole charade would be laughable if it was not so consequential for the future of free speech and free elections in our country. But it is.
* * *
What—you ask—do these stories from the cancel-culture frontlines have to do with antitrust?
The simple answer is “everything.”
All these stories are downstream from concentrated private power. Lax antitrust standards and even laxer antitrust enforcement have led to a new Gilded Age in which our sovereign power—“We, the people”—has long since been swamped by increasingly concentrated, private, and overwhelmingly woke corporate power. The sooner Republicans embrace this reality, the better, not just for Republicans but also for the Republic we can feel slipping through our fingers.
The Great Antitrust Unraveling
The deep irony of this story is that it was mostly Republicans who steered antitrust off-course in the first place. We created the conditions that led to woke corporatism. Yes, we made our own cancelation possible because we magicked away the threat from concentrated, woke corporate power by whittling down our once-impactful antitrust laws. We did this not appreciating that the private power we enabled would eventually come for us.
For the most part, it was done with relatively good intentions. The libertarians among us were relentlessly focused on abuse of government power, not private power. This was particularly the case with regard to Big Tech. Over the past twenty years, we had a vague notion that Google, Facebook, and the others were quietly amassing data lakes about us, but we soothed ourselves with the notion that everything would be okay because “Google doesn’t have an army.”
In truth, Google, Facebook, and the gang didn’t need an army. They had all the power they needed in our data, monopoly profits, and their powerful, proprietary algorithms. It turned out they could even swing elections against Republican candidates. In fact, they probably did.
Psychologist Robert Epstein testified to Congress in June 2019 that, based on his analysis using the platforms’ own data, “if these companies all support the same candidate—and that’s likely, needless to say—they will be able to shift upwards of 15 million votes to that candidate with no one knowing and without leaving a paper trail.” There is no army in the world that could replicate this feat, and yet Google and the gang can, without firing a single bullet.
What’s more, they can do it with help from Republicans who gladly hand over our data to be surveilled in exchange for “free” internet searches. This was our in-kind political contribution to the Democrat Party—we just never knew it was until recently.
Antitrust played a pivotal role in allowing this woke private power to grow and metastasize in our economy and, eventually, in our democracy. Republicans played a pivotal role in weakening antitrust and hobbling antitrust enforcement agencies. Although we do not realize it today, this actually marks a break from Republican tradition. Senator John Sherman—of the
Sherman Act—was, again, a Republican. His landmark antitrust legislation was signed into law by another Republican, President Benjamin Harrison. His successor, Teddy Roosevelt, was the original trustbuster. In sum, antitrust was as much a Republican political construct as it was anything else.
And it wasn’t just about politics. As economics became professionalized in the post-war period, it found its way into antitrust -- and even conservative economists back then agreed that robust antitrust enforcement was a good and necessary predicate to a free market economy. Included here were Friedrich Hayek and later George Stigler, who wrote: “The dissolution of big businesses is...a part of the program necessary to increase the support for a private, competitive enterprise economy, and reverse the drift toward government control.”
These economists had witnessed the disastrous results from the fusion of concentrated economic power with the state in Nazi Germany and elsewhere and they saw sound antitrust enforcement as a key tool in preventing this outcome in the U.S.
But then the Chicago School of Antitrust came along. Today, we are informed by the antitrust brain trust that the Chicago School is “mainstream, modern antitrust.” At the time of its inception, however. It was anything but mainstream. It began with an obscure academic named Aaron Director, a Russian-born immigrant who began his academic career as a socialist. His contribution to antitrust was the notion of “consumer welfare,” meaning the only thing that matters when applying antitrust to a given situation is its impact on price or output.
Interestingly, nowhere in our nation’s antitrust statutes are the words “consumer welfare” mentioned and yet, fast forward to today, and you might think that Aaron Director had authored our antitrust statutes, not the United States Congress.
Not in the antitrust statutes’ plain text (textualism), let alone how that text was understood by the public at the time of its enactment (originalism). In other words, the consumer-welfare standard grafted onto our antitrust statutes by academics and judges to limit their effectiveness is (conservative) judicial activism.
Yet today, the Chicago School adherents talk about “consumer welfare” as if it is the law of the land.
Another insight from the Chicago School was a belief that, over time, market entry would solve every monopoly problem. Further, the only durable entry barriers the Chicago School recognized were those created by the government in the form of regulation.
Gradually, with support from lawyers including Robert Bork and Richard Posner, these Chicago School economic idioms became mainstream antitrust and were baked into antitrust agency guidance and court opinions through a “lather, rinse, and repeat” process.
Further, the whole process took on the appearance of a one-way ratchet. As each new generation of antitrust practitioners assumed the Chicago School mantle, they looked for ways to drive the ratchet forward by raising the bar on antitrust enforcement.
Unsurprisingly, the whole construct moved further away from antitrust’s original congressional intent and toward a privatized legal standard driven by well-heeled legal and economic practitioners, both Democrat and Republican, who passed through the agencies’ revolving doors with relative ease, to much applause from their fellow travelers.
It is important to note that this decades-long process played out without significant input from Congress, whether in the form of amendments to existing antitrust statutes or congressional oversight of the antitrust agencies themselves.
The Consumer-Welfare Standard and Big Tech’s Antitrust Amnesty
By the time the dominant internet platforms reached monopoly status, the Chicago School thinking had pretty much drowned out opposition among the antitrust bar, economic academics, and the antitrust agencies.
Further, at some point along the way, the Chicago School antitrust became fully bipartisan. So much so that by the time Google first came under antitrust scrutiny from the Obama Federal Trade Commission (FTC) -- one of the two federal law-enforcement agencies -- in 2011, the company had distilled the Chicago School down to two somewhat glib antitrust defenses, both of which the FTC bought.
First, there could be no impact on consumer welfare from Google’s conduct in the internet search market because “how can you have a price increase on free?”
Second, entry into the internet search market was easy since “competition is just a click away.”
As is well documented elsewhere, the Obama FTC closed its investigation into Google in early 2013, shortly after Obama secured his second term in office. The vote to close was 5-0, meaning both Republican commissioners on the five-member commission agreed with the Democrat majority that Google had no case to answer.
In business, as in life itself, timing is everything. And the internet platforms had impeccable timing when it came to antitrust.
Escaping the Antitrust Mess
Having examined what got us into this mess, the question becomes for Republicans:
How do we get out of it?
This will not be an overnight process.
The first thing we must do is admit to ourselves that Big Tech’s private, corporate power is—to quote Congressman Jim Jordan—“out to get us.”
For too long, Republicans have been stuck in the denial stage of the Big Tech grief cycle. We cling to the belief that the Chicago School is a Republican construct, and therefore sound policy. Antitrust may have been Republican at one point, but there is nothing conservative about the role Big Tech and other woke monopolists play in our society today. Woke corporatism, cancel culture, crony capitalism, social-media censorship, all these things were made possible by woke economic concentration, the likes of which we have not seen since the Gilded Age.
This realization will no doubt trigger many Republicans—in particular those on Big Tech’s Washington, D.C. payroll. Their anger will be the next stage in the Republican grief cycle, but we cannot let their pocketbooks hold us back. There is too much at stake for that.
The next stage for Republicans working through the Big Tech antitrust challenge will be bargaining. This will require debate as Republicans in Congress work through the legislative options before them. This work is well under way in the House Judiciary Committee antitrust Subcommittee, where ranking member Ken Buck is leading the debate. Following on from his Third Way Report, in which he outlines his position in the majority’s legislative proposals to tackle Big Tech’s dominance, Congressman Buck has worked closely with other subcommittee members to find bipartisan consensus on antitrust reform measures. He and his colleagues will meet with stiff opposition from fellow Republicans both on and off the Hill.
Big Tech has amassed an army of lobbyists and think tank supporters on the right and the left. No other economic sector spends as much money on lobbying. Google’s DC influence operation in particular is breathtaking in its reach.
Big Tech will likely lead their Republican advocacy with the following myths about reforming antitrust to tackle Big Tech:
#1 That it is regulation and Republicans should, on principle, always oppose regulation.
#2 That the Chicago School consumer-welfare standard is “the law” and antitrust reform would set the clock back in time, reversing so-called “modern antitrust.”
#3 That antitrust reforms will be bad for small businesses and stifle innovation.
The response to myth #1 is easy. Antitrust is quite simply not regulation. It is targeted law enforcement. It goes after marketplace conduct that has—in the case of the two federal law-enforcement agencies (FTC and the Antitrust Division at the Justice Department) and the state attorneys general—been thoroughly investigated before the law is enforced.
In contrast, regulation goes after whole sectors of the economy without necessarily finding fault first. Traditionally, Republicans have been the pro-law enforcement party. When others look to defund the police, we stand behind them. So when Congressman Ken Buck and others agree that our antitrust agencies need more funding to do their work, do not see this as regulatory mission creep.
Quite the opposite: It is lax antitrust enforcement and highly concentrated markets that often trigger the decision to regulate markets in the first place. Antitrust protects the free market from regulation and should therefore not be conflated with it.
Myth #2: “Consumer Welfare” was a construct created by a lone academic in Chicago, not the
United States Congress. Congress has the power to undo the consumer-welfare standard and reform our antitrust laws. This is what Congress is for. As Teddy Roosevelt once stated: “The great corporations which we have grown to speak of rather loosely as trusts are the creatures of the State, and the State not only has the right to control them, but it is in duty bound to control them wherever the need of such control is shown.”
That is not to say that the baby should be thrown out with the bath water. To the contrary, there is always room for antitrust expertise in an antitrust debate. However, what Big Tech advocates seem to suggest is that there are quite literally no antitrust problems to be solved and no debate to be had among Republicans. Either that, or non-experts have no seat at the table for fear of messing with something complex that they do not understand.
This cannot stand. At a minimum, Republican Members of Congress have the right to ask the question: “has consumer welfare actually resulted in consumer welfare? If yes, how so?” On these questions, we need to have an honest debate, not just swallow talking points from well-heeled lobbyists for Corporate America.
Finally, Myth #3. Big Tech’s well-heeled lobbyists will tell Republican members of Congress that antitrust reform measures will hurt small businesses and stymie innovation. Tellingly, most small businesses brave enough to testify before Congress on the issue have told members the opposite. They are, in some cases, literally begging Congress for help in their efforts to combat Big Tech’s market power.
Amazon has become the poster child in this regard. As documented in last year’s House Judiciary Committee report on competition in digital markets, Amazon has 2.3 million active third-party sellers on its marketplace worldwide, and a recent survey estimates that about 37% of them—about 850,000 sellers—rely on Amazon as their sole source of income. The House report found that Amazon’s conflict of interest as both a seller and host to competitive third-party sellers has created serious challenges for these small businesses. The report concluded:
“Amazon has engaged in extensive anticompetitive conduct in its treatment of third-party sellers. Publicly, Amazon describes third-party sellers as ‘partners.’ But internal documents show that behind closed doors, the company refers to them as ‘internal competitors.’”
These small businesses and others form the backbone of our economy. They spur job growth and innovation in every state—Red and Blue—and they support antitrust reform that would rein in Big Tech’s market power. Since when have Republicans been in the game of siding with Big Tech against small businesses?
How We Move Forward
If the last year underscored anything, it is that Republicans are no longer the party of Big Business, including and especially Big Tech. Their once thinly veiled contempt for us has truly morphed into open contempt. So why do we continue to carry water for them?
The path forward for Republicans is to think about Big Tech and antitrust in the same way we increasingly think about China: our old operating modes with respect to both were driven by economic theories that did not pan out. In the early 1990s, we were reliably informed by neoliberal economists, including the Chicago School, that if China were allowed to engage in free trade and join multilateral organizations that the country would gradually democratize and embrace America as the world’s only superpower.
We know now that this theory missed the mark by a wide margin. Instead of democratizing, China became a surveillance state (thanks in large part to the U.S. internet). Contrary to the Chicago School theory, China never engaged in free or fair trade. Three million jobs shipped from the U.S. to China over the past twenty years -- and our children get defective toys and contaminated baby formula.
It took President Trump to wake us from our China slumber before it was too late. Similarly, the Chicago School economic theory applied in Big Tech markets has suffered a similar fate.
We were told by the Chicago School experts that market power in these markets would be fleeting because entry barriers were low and someone would eventually build a better mousetrap. We were also informed by these experts that Big Tech markets—in which many services are provided for free—defied application of the consumer-welfare standard.
Therefore, there could be no “harm,” as narrowly defined by the Chicago School, to consumers in Big Tech markets. We got that one wrong too, making it time to move on.
As with China, it also took President Trump to wake us from our Big Tech antitrust slumber, which is why his administration filed suits against both Google and Facebook last year.
It is past time for all Republicans to wake up. Woke Big Tech platforms are not our friends. The past year has demonstrated time and again just how harmful Big Tech platforms actually are to Republicans: to conservative speech, to our ability to make a living and run for office, and ultimately to our democracy. As Senator John Sherman so eloquently put it when he put his name to the Sherman Act:
“If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.”
Today, one of the precious commodities imperiled by Big Tech’s market power is conservative speech, which is downstream from antitrust. Google, Facebook, and others can throttle conservatives because they have the market power to do so. It’s the same market power that allows Big Tech to crush small businesses. And it’s the same market power that allows Big Tech to deplatform a sitting President of the United States not long after they blocked the New York Post -- one of our nation’s oldest newspapers -- from circulating the most important news story in last year’s presidential election cycle.
The only way to tackle this market power is through antitrust. The time to act is now.
Mike Davis is founder and president of the Internet Accountability Project (IAP), a conservative grassroots advocacy organization that opposes Big Tech and seeks to hold them accountable for their bad acts.