Last month, a bipartisan group led by Senators Amy Klobuchar of Minnesota and Chuck Grassley of Iowa announced a bill that would, in many cases, ban one of the most common practices of big tech platforms such as Google, Amazon, Apple, Microsoft and Facebook ( which now wish to be known as Meta). The bill is being promoted as a way to protect consumers from the power of Big Tech, but it will actually make things worse for users. It would undermine the trial-and-error process that built the Internet as we know it today.
Much of the value we get from digital platforms like those run by Amazon, Apple and Google comes from the suites of services they provide. If you Google “dim sum near me” you’ll get a list of search results and a Google Maps box showing you the nearest pancake restaurants. When you take a photo on your iPhone, it automatically saves it to iCloud. You get the map and cloud backup without even having to think about it.
Although users may like these bundled services – widely known as “self-favorites” – they are unpopular with competitors whose products are marginalized, such as Yelp and Dropbox.
House lawmakers originally proposed explicitly banning self-preference. It might mean, for example, that Google can’t link to Google Docs from Gmail and Amazon can’t sell its own brands on its website.
To his credit, the new Senate version introduces an outside clause. Bundling of Services is permitted as long as the Company demonstrates that doing so is necessary to “enhance the essential functions” of the Platform. This means that it is possible that Google can still include a Maps box at the top of the relevant search results page and that Amazon may continue to sell Amazon Basics batteries.
This may seem like a reasonable compromise, but it misunderstands the trial-and-error process of innovation. Companies have ideas about what consumers might like, and they experiment with those ideas. Those that consumers love are left standing while others fall apart. It is often difficult for a company to know exactly why their product is a success. The requirement that business must Proving that a particular feature that improves their service would prevent many of these experiences, making consumers and competition worse off.
After all, some of the most successful business ideas came from divine inspiration or just stupid luck. When 3M tried to develop a super-strong glue, it ended up with a glue that couldn’t stick at all — and that’s how Post-it Note paper was born. Steve Jobs avoided market research in favor of insisting on what he is Believes that customers want. Turns out he was right.
Customers themselves often cannot explain why Popeyes would prefer KFC or red cars over green ones. But they don’t have to – buying a product or using a service shows that they prefer it. Markets work because companies don’t need to know why customers want their products. Prices and profits tell them to keep doing what they’re doing. Anyone who’s come up with a business idea (or seen “Shark Tank”) understands that even if you know why your idea is good, convincing someone else of that fact is an entirely different matter—not to mention convincing a hostile court or federal agency.
This is what makes the new Senate bill so harmful. Under its approach, Google will have to explain why certain practices are necessary to improve its products. If the company fails to do so, it will face fines of up to 15 percent of its total revenue in the United States. This enormous risk, in many cases, makes it not worth trying in the first place.
The bill’s authors might reply that MapQuest and Yelp only stand a chance of competing if Google is forced to list their services alongside or in place of Google Maps and its comment boxes. According to the logic of the law, the more choices consumers have at each moment, the better the competition.
This is not how most consumers see it. Choice is valuable, but it comes at the cost of complexity. We don’t want to have to deal with choosing from a million ice cream flavors every time we go to the grocery store; Thus, through trial and error, stores narrow the selection down to a reasonable number of options. If Walmart had to explain why it was necessary to stock up on coconut ice cream but not pineapple, or one brand over another, could it do it? If it were to lose 15 percent of its total revenue for failing to convince the court that one flavor was necessary while another was not, how much experience?
Due to the abundance of choices and information on the Internet, online platforms filter choices and information to reduce the complexity and noise that consumers will have to navigate. For example, both YouTube and TikTok show videos that are relevant to specific users, and most of us tend to like them.
None of this means that companies should get away with behavior simply because they are unaware of the potential harms. The current approach of the law properly makes some activities illegal, such as price-fixing by cartels, because this behavior is always harmful to consumers. But otherwise, it is up to the antitrust plaintiff to prove that the activity is detrimental to competition. Otherwise, the risk of losing useful behavior is too great.
The principle that corporations, like citizens, must be presumed innocent until proven guilty comes from the fact that regulators, prosecutors and courts often get things wrong, so we must be careful about giving any of them the ability to dictate upfront the extent of privacy. Companies operate. If we get rid of this principle just to punish the big tech companies, it’s the users who will suffer.
Brian Albrecht is an assistant professor of economics at Kennesaw State University in Georgia. Writes a weekly newsletter on basic economics in pricetheory.substack.com. Follow him on Twitter Tweet embed. Sam Bowman is director of competition policy at the International Center for Law and Economics in Portland, Oregon.