Antitrust key to big tech innovation

Presently large digital companies, known as Big Tech, are in the crosshairs of regulators and Congress for alleged monopolistic conduct. Antitrust lawsuits, and government and legislative interventions worldwide against Big Tech, are hard to count. Keeping track of their developments has become challenging. A recent study published in this journal identified “100-plus antitrust cases” only considering Google in 23 jurisdictions.

The U.S. has often been criticized for being lax compared to EU antitrust enforcers in dealing with Big Tech’s power. But innovation does not seem to be a hallmark of EU companies. In the U.S., Alexander Bell invented and patented the telephone before founding what was later called AT&T. It was at AT&T that other game-changer technologies, such as the transistor and Unix operating system, were also invented. IBM, Microsoft, Google are only three other examples of U.S. tech companies which changed the computer industry forever by setting the tone for the present digital economy. This raises the question of whether U.S. antitrust enforcement action played a prominent role in the innovation process which led to breakthrough technologies flourishing especially in the computer industry. It also begs the question “why do we see less innovation on the other side of the Atlantic?”

The economist Reuven Brenner argued that “every business competes by betting on new ideas,” and he is probably right. Although innovation is a broad term, which might be difficult to precisely define, “new ideas” are fundamental in the innovation process. However, it is hard to think we can either regulate or predict new ideas effectively. Judge Richard A. Posner wisely observed that antitrust intervention might be slow in comparison to the rapidity of innovation. However, the computer industry would certainly look different today without any antitrust intervention. Although antitrust in the U.S. is not the cure for any economic diseases, more than a century of experience in enforcing this law shows some important evidence. Antitrust law often paved the path of innovation toward the creation of new markets and development of new technologies, which according to economists, such as Joseph Schumpeter, is what competition is all about.

History tells us that antitrust enforcers can be crucial in maintaining the delicate balance between controlling the actions of large players without compromising their incentives to innovate through consent antitrust measures. In each situation, the company’s role in shaping antitrust remedies were fundamental. And in retrospect, as we look closely at the computer industry, it was the U.S. antitrust approach, albeit not perfect, that seems to have done its job well.