The Hipsters Have Infected the Senate

The hipsters are taking over! No, not the bearded craft beer drinking aesthetes you’ll find hanging out in your local coffee shop. The antitrust hipsters — the people who want America to be more expensive, less convenient and less innovative for consumers everywhere. The American Choice and Innovation Act raised by Amy Klobuchar and Chuck Grassley has got hipsterism written all over it. Senators must vote it down.

The “highlight” of the bill is the prohibition of dominant online platforms from favoring their own services. Just like a supermarket will place its more profitable items on shelves more likely to be noticed by customers, websites like Amazon will routinely put their products at the top of web pages to maximise the chances that their products are bought instead of their competitors.

Not only is this a fairly reasonable business practice, but it’s also incredibly beneficial to consumers. For example, when one googles a restaurant or a shop, they’ll find a Google Maps link at the top of the page offering directions, and below that they’ll see reviews to help them decide whether it’s the place they’d really like to go. Google helps consumers gain all the information they need in a single search.

But the hipsters refuse to recognise this as a good thing. Instead, they ask why Google Maps should be given this privilege. To them, the fact that Google provides such excellent service to its users is anticompetitive, since competitors like Waze can’t benefit from Google’s flawless integration.

However, the key question we must ask is where is the harm?

The rock that modern antitrust law is built upon is the consumer welfare standard. This standard directs courts to assess the merits of a competition case based on whether it maximises consumer welfare. We can apply this to the kind of practices that Klobuchar et al are trying to prohibit by asking ourselves two questions. Does Google giving preferential treatment to Maps make consumers worse off? Clearly not. There is no need for intervention based on this standard.

The hipsters recognise this, and that’s why they want to end this standard. In her seminal paper, Amazon’s Antitrust Paradox, Queen of the Hipsters and FTC chairwoman Lina Khan argued that in an antitrust case we should look at the overall structure and dynamics of a market rather than simply weighing impacts on price and output (which is a strawman of the consumer welfare standard). Though price and output are often used proxies for consumer welfare, the ultimate investigation has always been whether the interests of the consumers, in their own opinion, is maximised.

But Khan argues that, instead of prioritizing the consumer, antitrust law should protect product quality, variety and innovation — all things that we already pay attention to under the consumer welfare standard.

However, she wants to have them explicitly recognised by moving to a structuralist method of market analysis. This is problematic because adding additional things for the courts to consider you risk antitrust law becoming convoluted and incoherant. The beauty of consumer welfare is it’s an objectively measurable category that judges can apply with a lot of ease relative to other metrics. Discretionary analyses of market structure are immeasurable, and thus will make antitrust enforcement appear arbitrary. For example, the DOJ have never shown the difference between predatory and competitive pricing. Instead, they’ve opted for a “I know it when I see it” approach. How can we possibly respect the rule of law by ensuring equal treatment of antitrust rules if we give judges such leeway to enforce it without a clear measurable standard? We can’t.

Moreover, the economic basis that large companies result in less innovation is completely at odds with reality. The economist Peter Chao-Wen Chen has found that a 3% increase in an industry’s merger rate causes a 1% increase in annual productivity growth. This productivity growth provides much needed money to help invest in the R&D necessary to innovation. So the hipsters are wrong to accuse antitrust orthodoxy of ignoring innovation.

Constant attacks on big business by politicians on both sides of the aisle may be popular, but their consequences are manifestly unpopular. Politicians like Amy Klobuchar are pursuing an agenda that will have Americans paying more without receiving any benefits. It’s high time we put a stop to these hipsters and allowed big business to continue doing the great job they have been doing.

Tom Spencer is a Tech Policy Fellow at Young Voices.