Senators Take Aim at Big Tech, Wall Street
In an Open Markets Institute event on October 11, Senators Shelley Moore Capito (R-WV), Mark Warner (D-VA), and Cory Booker (D-NJ) and Securities and Exchange Commissioner Rob Jackson grappled with the issue of antitrust law in a dynamic business landscape defined by high-tech firms, disruptive innovation, and globalization.
Capito focused her remarks on how the brain drain is affecting rural America, including her home state of West Virginia. The senator argued that new policy tools were needed to foster innovative business ideas and create jobs that will draw back West Virginia’s youth. Senators also praised the Opportunity Zone (OZ) legislation included in the 2017 tax code overhaul. The OZ legislation provides tax incentives for new business development in America’s rural areas and second- and third-tier cities.
Several speakers cited the statistic that approximately 85 percent of venture capital investment goes to startups in California, New York, and Massachusetts. Responding to this, Capito told investors not to “give up on rural America,” praising her state’s hard-working culture, strong institutions of higher education, and low cost of living.
Warner, who worked as a telecoms executive before he became governor and then senator of Virginia, took aim at big Silicon Valley tech firms like Facebook, Google, and Twitter. The senator argued that recent statements from technology company CEOs on issues like bias, radicalization, and the spread of misinformation show an industry that is falling out of touch with reality.
Warner noted that eight of the top ten apps in the Apple App Store were developed by Google and Facebook and called this a troubling sign of brewing oligopoly. The senator urged the Federal Trade Commission (FTC), which is partly responsible for antitrust enforcement, to investigate these big tech platforms to ensure that a healthy, competitive market can exist that allows for new entrants and in which no tech firm becomes too-big-to-fail.
Booker, a fierce opponent of the consumer welfare standard of antitrust enforcement used by the FTC and Department of Justice, called for new research to assess the standard’s shortcomings and propose enforcement solutions. This standard is based on the idea that the sole criterion for approval when evaluating a proposed merger is whether that merger will improve outcomes for consumers — either by lowering prices or improving quality, convenience, availability, or variety. European competition regulators, meanwhile, have historically favored the market concentration model of antitrust, which is primarily concerned with ensuring all entrants have a fair shot at competing in the market. Booker argued for a middle-road approach to balance the welfare of consumers with other stakeholders like employees and suppliers.
Jackson tended to agree with Booker’s assessment of antitrust policy, arguing that the Securities and Exchange Commission (SEC) must refocus on ensuring competition in the markets it oversees. He called for the creation of an SEC Office of Antitrust Economics and cited concentration in the investment banking sector as the prime factor in stifling price competition for initial public offerings (IPO) services. Jackson’s research shows that the average price of these services has stayed constant since the 1990s despite massive improvements in technology and efficiency, which should have resulted in fierce price competition and a greatly reduced IPO fee. However, the commissioner claimed that a corresponding fall in the number of investment banks offering these services prevented price competition.
The OMI event touched on many different facets of the economy, but the driving force behind all the debate was that healthy and competitive markets have historically been the bedrock of American economic advancement. However, all of the speakers expressed worry that if current economic trends are not reversed, the American economy is on its way toward unhealthy markets that stunt competition, raise prices, lower product quality, and drive inequality by ensuring that established players make a healthy return and new entrants are choked in their infancy. As Jackson said, “Wall Street needs to be put back in its place.”