Antitrust innovation is uncertain and delayed – loses the China tech race.

One solution that encourages innovators and entrepreneurs to take the risk of failure has been to allow them to be bought by larger, established corporations. In some sectors, like defense, buying innovative start-ups is a primary source of innovation. Two decades ago, when the United States was more comfortable with the lead it and its allies had over China in technology, dismantling the current innovation system in pursuit of hypnotical gains may have been a tolerable risk, but that is no longer the case. That means the FTC and Department of Justice (DOJ) antitrust effort need to be subsidiary to larger strategic concerns and made as part of decisions on national security, particularly as some actions (such as blocking acquisitions and partnerships between start-ups and big tech firms) will likely have a chilling effect on the U.S. innovation system.

Another tradeoff is possible future gain in exchange for potentially immediate loss. There is good research on how antitrust measures can increase innovation, but the effect is not immediate. This makes competition different from early antitrust episodes (Standard Oil or AT&T) in that the issue is not purely domestic, the United States cases an aggressive competitor, and there is risk that in the time it would take for the U.S. innovation system to recover from antitrust action, China would pull irreversibly ahead. This kind of irreversible loss of position has been an element of industrial competition among great powers since the 1900s and must be avoided.

A powerful counterpoint to antitrust measures can be found in the actions of the European Commission. Europe, despite strong research capabilities and an energetic (if often frustrated) entrepreneurial culture, is not an innovation powerhouse and lags far behind the United States and China. The FTC and DOJ have worked with the European Commission in developing antitrust policies and regulations, but an attempt to align or transplant Brussel’s regulatory culture to the United States creates a significant risk of damage to U.S. national security and the ability to innovate and create new technologies while providing an advantage to China. The United States must decide if it is willing to take a large gamble—that reassembling its innovation machine during an international competition can be done without loss.

Acting against harm to privacy or ending self-preferencing are essential, but discounting the contest with China (as many antitrust initiatives seem to do) or arguing that any risk to innovation can be compensated in a timely fashion by the unproven benefits of disrupting tech giants may reflect a degree of hubris. U.S. foreign policy has been scarred in this century by hubris. There may be a similar degree of hubris in our approach to tech competition with China and antitrust. The argument that there is some set of changes that promise hypothetical improvements and that “disrupting” the successful U.S. innovation machine in mid-race can be done without risk in the current politico-military contest is quite a gamble. The antitrust question is not simply one for lawyers and businesses; it is now over industrial policy and national security, and these should take priority.

The central question is whether the United States needs national champions for a military competition with China or, conversely, whether it should harm any de facto national champions during that contest. The answer to the latter question is clearly no. A strong case can be made that de facto national champions do not give other nations an advantage in competing to innovate. If one assumed, optimistically, that there is ample time to dawdle in this contest with China, Russia, Iran, and others, antitrust advocates might have a point; but if one assumes that the risk of great power conflict is greater than it has been in decades, now is not the time for an experiment in legal theory. If predictions of “Peak China” have any merit, and if the United States can avoid a clash in the years it will take China under Xi to decline, it can later afford testing antirust policy some years from now, but not at the moment.