The rhetoric of techlash: A source of clarity or confusion?

On Oct. 6, the staff of a Subcommittee of the House Judiciary Committee issued the long-awaited report capping its 16-month investigation into competition in digital markets. The highlight of this inquiry was the July testimony by the CEOs of Google, Amazon, Facebook and Apple, firms often grouped together under the acronym GAFA. Sometimes GAFA is replaced by the more colorful term FANG, with Netflix replacing Apple. 

Such monikers can be sources of enlightenment or confusion. Grouping firms together provides insights when they share a common thread that is meaningful for analysis. If not, clustering them together serves as an invitation to gloss over important differences and to engage in guilt by association. 

Closer inspection reveals that each of these companies employs business models that are quite distinct from one another. Google is primarily a search company. Amazon’s main lines of business are e-commerce and cloud computing. Facebook focuses on social media. Apple is predominantly a device manufacturer. Netflix’s principal product is streaming video. Their revenue models vary widely as well, with two relying mainly on advertising, two relying principally on direct payments, and one combining the two.

These differences raise serious doubts about the utility of acronyms such as GAFA and FANG, as well as other commonly used terms such as “big tech,” “digital platforms,” the “Four Horsemen,” or the “Gang of Four.” The past half-century of antitrust has replaced simplistic claims that big is necessarily bad with the need for careful examination of the effects that particular conduct has on consumers. 

For the most part, disputes over antitrust have taken place in courts of law that require case-specific evidence of consumer harm. Legislative processes are different. Drafters of reform legislation may be tempted to generalize from firm-specific anecdotes to create broad rules that lump together companies and conduct that do not raise the same risks.

The Oct. 6 staff report provides an eloquent illustration of how hard avoiding this potential pitfall can be. The report begins by analyzing 10 distinct markets and what it regards as problematic conduct by four large firms. However, the recommendations largely disregard this detailed analysis of industry features and particular-firm conduct and instead simply amalgamate all of these markets and firms under the umbrella term “dominant platforms.” 

The report justifies this blunt approach by suggesting that factors such as network effects, which arise when the value of a network increases with its size, make digital markets prone to monopolization. But it would blink reality simply to assume that network size would have the exact same significance in markets as diverse as search, e-commerce, social networking, devices, and cloud computing, and with respect to the diversity of revenue models being employed. 

The potential for overly broad generalizations underscores the risks of allowing slogans to substitute for careful analysis of competitive effects and specific harms to consumers. Catchy phrases are useful when litigating in the court of public opinion. They offer less certain benefits to those charged with the mission of protecting the welfare of consumers. 

This lack of analytical precision threatens to make any proposed statutory reforms miss their mark. The best approach is to use the insights provided by the investigation to craft legislative remedies targeted at any specific competitive problems that were found. An approach that invokes a few problematic examples to justify sweeping reforms may well find that the intervention, no matter well intentioned, may miss its mark and cause unwelcome unintended consequences.

The report released by Rep. Ken Buck (R-Colo.) already signals the extent to which the legislative process will put proponents of major antitrust reform to their proof. The report’s preference for the case-specific approach of antitrust over more blunt interventions, and its recognition that that certain policy prescriptions, such as mandatory structural separation, broader use of class actions, the elimination of arbitration clauses, and nondiscrimination requirements modeled on repealed net neutrality rules are “nonstarters,” guarantee that Congress will have to ask the hard questions about which precise problems are worth trying to solve and to fashion remedies designed to address them.

Indiscriminate use of verbal shortcuts risks glossing over critical differences and invites imposing overly inclusive restrictions that do not create any consumer benefits. The detailed work needed to make good competition policy may be less sexy, but it is essential if policymakers are to ensure that any changes they make promote the interests of consumers. Any other approach risks turning the legislative process into guilt by epithet.

Christopher S. Yoo is the John H. Chestnut Professor of Law, Communication and Computer & Information Science and the founding director of the Center for Technology, Innovation and Competition at the University of Pennsylvania.