As the Biden administration searches for more ways to appease its progressive base, the appointments of Tim Wu and Lina Khan signal a shift in the plans to address freedom of contract between internet providers, large tech firms, and users.
Wu has been an ardent critic of big tech and has argued against their freedom to contract with internet providers to allow high-traffic sites to reach users faster. Even when it results in higher costs for users, Wu has been in favour of breaking up what he perceives to be tech monopolies threatening the emergence of smaller applications, sites, and services.
Similarly, Khan is known for her 2016 “Amazon’s antitrust paradox” article, which advocated for replacing the consumer welfare approach of traditional antitrust policy with a vision of the “structural separation” of big tech companies that Khan fears are too powerful.
The consumer welfare standard for antitrust policy that prevails in the United States means that some firms may get what appears to be an unfair benefit, but only when this results in the lowest possible cost to the customer.
As a result, internet provider contracts favouring “giants” like Netflix will sometimes seem unfair since they benefit these firms more than others. This would be allowed, though, since more users choose Netflix as their go-to streaming service, and greater freedom to respond to that demand will be in the interest of the greatest number of people overall.
Sometimes, monopolies and quasi-monopolies are perceived as predatory because they allow a single company to fix prices in the absence of outside competition. However, if a dominant provider or firm emerges, the consumer welfare standard kicks in and ensures that such market dominance favours the customer by, for example, transferring the benefits of sunk capital expenditures and low transaction costs that monopolies enjoy to consumers in the form of lower prices.
It’s imperative that Biden, Khan, and Wu take stock of just how directionless any antitrust standard would be without this focus on the welfare of ordinary Americans. They must take seriously the fact that while legislating against tech giants may win political points, it will simultaneously hurt those who wish to access the services they love in an environment where those who provide them are free to contract with one another to serve their customers best—in particular by driving down prices.
By Eric Seguin, Research Intern at the MEI and Concordia MA Philosophy Student.