As a member of the first generation to grow up with internet platforms and social media, the push to dismantle America’s leading technology companies feels especially regressive. Among my peers, now entering the workforce, many of us have hardly ordered anything without the option of two-day shipping and never driven anywhere without Google Maps directing us from our smartphones. Technology companies have their faults, but the increasingly dystopian narrative around internet and technology services perpetuated by Senator Klobuchar’s American Innovation and Choice Online Act doesn’t square with how indispensable they’ve become consumers here and around the world.
Here are five reasons legislators should take a careful approach in applying the blunt instrument of antitrust enforcement against America’s most innovative and globally competitive companies:
1. Big U.S. tech firms have created and continue to create millions of new, well-paid jobs for U.S. workers at all skill levels.
As the Progressive Policy Institute has documented, tech-ecommerce companies in recent years have been the biggest source of job growth in the U.S. economy. This proved especially important during the pandemic shutdowns, when Americans turned en masse to the digital ecosystem to work, shop, keep up with their studies and stay in touch with friends and family. Over the past five years, the technology and ecommerce industry created 1.8 million jobs in the United States, more than 40% of total private sector job gains over that period.
Moreover, these jobs pay decent wages and offer good benefits to workers regardless of their skill level. In the warehousing industry, which includes most ecommerce fulfillment centers, the average hourly earnings for production and nonsupervisory workers were $21.39 per hour in November 2021, up 19% over the past year. That’s 30% higher than the comparable figure for general merchandise retailers, and just 5% below the pay in nondurable manufacturing. PPI’s analysis shows that jobs in the tech and ecommerce ecosystem pay 32% more than in the economy as a whole for workers with some college, including an associate degree.
2. As U.S consumers feel the pinch from the highest inflation rates in 40 years, inflation in the digital economy has remained low.
As the old saying goes, “if it ain’t broke, don’t fix it.” The Senate bill is supposed to help consumers, but the digital sector is working as a powerful disinflationary force. Over the past year, prices for digital consumer goods and services—including hardware such as smartphones and computers as well as phone and internet services—have risen by only 1.6% overall, compared to 5.5% for consumer inflation less food and energy. In particular, the price of smartphones has dropped by 14% over the past year, according to figures from the Bureau of Labor Statistics.
3. The innovative services provided by online platforms are highly valued by U.S. consumers.
The Senate bill uses broad generalizations about alleged threats to competition and threatens tech companies with huge penalties without offering clear guidelines for what its authors deem acceptable. This ambiguity could subject tech companies to expensive lawsuits for almost any consumer-friendly innovation. One example: Amazon Prime, which offers free rapid delivery for a yearly subscription, is extremely popular with consumers. Other sellers can share Amazon’s delivery system–built on billions of dollars of investment–by paying a fee and meeting certain requirements. If the bill becomes law, it’s certain that Amazon will be sued on the grounds that Amazon Prime’s benefits to consumers represent an unfair advantage to the company. The result could be the end or significant curtailment of the Prime program. A recent PPI poll found that 72% of voters in political battleground states oppose legislation that would prevent Amazon from selling Amazon Basics products, while 84% oppose legislation that would prevent Amazon from providing Prime shipping services.
4. Because of economies of scale, large online platforms can offer services to small businesses, retailers and developers at relatively low cost.
The Senate bill simply assumes that, where tech is concerned, big is bad. In the real world, the economies of scale offered by platforms make it possible to offer services to small businesses, retailers, and developers at relatively low cost. Take advertising, for example. The price of advertising sold by newspapers has gone down by 7% since 2010. But the price of internet advertising, except for print publishers, has dropped by almost 40% over the same period.
Similarly, small app developers can get wide distribution through Apple’s and Google’s app stores–and certification as being safe for consumers–at a minimal cost. Small businesses can use Gmail and other online services, also at zero or low cost. And small retailers and manufacturers can utilize tools such as Amazon’s Fulfillment by Amazon program to list their products on the platform with the benefit of Prime delivery. Amazon then handles the distribution of these products as well as any returns, providing simple distribution methods for businesses that lack the infrastructure to do so themselves. With more than 200 million consumers subscribed to Amazon’s prime services worldwide, the platform provides an incredible reach for small and medium sized businesses, which the company says make up 60% of their retail sales from 1.9 million individual sellers. If passed, this bill would prevent Amazon from offering these services, harming independent retailers’ ability to reach Amazon’s established customer base.
5. Leading technology companies are vital to America’s economic competitiveness on the global stage.
As the balance of economic power between the United States and China remains in question, hobbling U.S. tech companies’ ability to innovate opens the door for emerging Chinese platforms such as Alibaba and TikTok to entrench themselves in U.S. and overseas markets. The United States is losing ground in technological leadership in key areas. This is particularly troubling when compared to our Chinese counterparts, who have doubled R&D spending as a percent of GDP over the same period. The U.S. is also increasingly reliant on imports of high-tech products, running a trade deficit of $304 billion in 2018.
Assuring American competitiveness in the high-tech sector is a pressing issue for voters. The PPI poll found that 74% of voters in battleground states are worried about the need for the United States to have an innovative tech sector so that Americans won’t have to become reliant on Chinese-developed tech.
The Senate bill couldn’t come at a worse moment. The U.S. economy is starting to rebound strongly from the pandemic recession. Unemployment is failing and wages are rising, though inflation clouds the picture. This simply isn’t the time to break up or severely regulate America’s most dynamic companies.