Opinion

HOFFMAN: Warren’s Plan To Break Big Tech Is Regulatory Overkill

REUTERS/Dado Ruvic/Illustration/File Photo

Adonis Hoffman Contributor

When Massachusetts Sen. Elizabeth Warren first went on the warpath against big banks, she captured the attention of middle America. Now, Warren has turned her wrath on Big Tech. Her mantra is that big companies are bad, and the bigger the badder they are for all of us. The government, she argues, should step-up its regulation of these companies and step-in to break them up if necessary. Not only is Warren wrong but she is also out of step with most Americans today.

It would be unfair to lay all the blame on Warren for the campaign against big corporations. This sort of populism has been a strain in American politics since the Revolution, and most recently since the Occupy Wall Street campaign. But today’s anti-corporate movement has a new look and a new lexicon, including terms like privacy, net neutrality and transparency, to accompany the typical notions of competition and consumer protection.

While Warren is the latest, and perhaps best known, trust-busting troubadour, other marquee names have joined the bandwagon. Democratic presidential candidates Amy Klobuchar, Bernie Sanders and Cory Booker are among them, along with the firebrand Alexandria Ocasio-Cortez.

Adding intellectual integrity to their ranks is Columbia University Law Professor Tim Wu, the activist academic who made history by coining the phrase “net neutrality.” Wu has been a forceful advocate for antitrust reform and lays out a compelling legal argument for stricter antitrust enforcement in the modern era.

Along with their public interest acolytes, these ultra-left leaders are angling to position antitrust policy as a mainstream political issue. Warren, in fact, is staking her presidential hopes on such a platform, although several red-state Republicans are also fed up with Facebook’s business practices. But doing so will be no easy feat.

For starters, the proposals to break up Facebook, Amazon and Google fly in the face of market economics and the legacy of value creation. While they have fallen short on data protection, consumer privacy and national security matters, Big Tech has given society more than it has taken. Whatever problems we have with them, breaking up is not the solution.

Zeroing in on telecom, media and technology firms is a safe bet for the big-is-bad movement, which gains occasional momentum from high profile mega-mergers in that sector. And there have been a number of them over the last few years, beginning with the Comcast-NBC Universal deal in 2013. Since then, we have seen AT&T-Time Warner at $85 billion; Comcast-Sky at $32.5 billion and a proposed Sprint-T-Mobile at $26 billion. Each of these deals was opposed by lawmakers and activists who, for whatever reason, never met a merger they liked.

The big-is-bad argument has an attractive emotional appeal, especially when big companies behave badly. As banks and tech firms get caught doing wrong, calls for breakup gain credibility. The problem with this approach is that it tends to paint every large enterprise with the same broad brush and ignores a few fundamental facts about the value of scale in a competitive global economy. While start-ups and entrepreneurs innovate, it takes scale and capital to deliver services to the consumer market.

The media industry is one such area where the big-is-bad approach can be especially harmful. Even when breakup is not the goal, these advocates seek to penalize large scale enterprises in other ways, including limiting growth or expanding taxes, even when doing so will harm consumers in the long run. For example, a longstanding federal law caps the amount of fees that states and localities can charge MVPDs for their rights of way to deliver services at 5 percent of revenue.

But activists are now arguing that these fees — or taxes — should be expanded to cover broadband internet services as well. In essence, they propose a new tax that would hinder the further rollout of high-speed broadband services to disadvantaged and other communities. The proposal is now before the FCC, which is faced with overturning decades of bipartisan policy decisions.

The anti-corporate animus toward major broadcasters has been equally palpable. The opposition to lifting the 39 percent cap on national media ownership has metastasized in Congress. Shortsighted Democrats have limited the capacity of American broadcasters to grow beyond a predetermined level, even when the very survival of the industry requires scale to survive the threats from Silicon Valley, private equity and other deep-pocketed competitors. While Sinclair Broadcasting has had its share of political and procedural mis-steps, opposition came from its plan to get bigger through acquisition.

While the Trump administration’s competition policy is inchoate and somewhat inconsistent, let’s hope the regulatory agencies will withstand the reflexive populism that penalizes scale and performance, especially when there is no record or indication of harm in the market. There is no doubt that big organizations bring unique problems to the market. They can be tone-deaf on customer service and slow to make changes to entrenched business practices that are not consumer-friendly. But these are remediable. In a global economy, it’s not so bad to have large American companies driving growth, jobs and GDP.

The American economic advantage has been fueled by policies that promote, not restrict, growth. The way to effectuate change is through regulatory oversight, not regulatory overkill. The move to dismember big companies is as misguided as torturing them with a thousand taxes.

Adonis Hoffman (@AdonisHoffman) is chairman of Business in the Public Interest. He held senior legal positions in the U.S. House of Representatives and the FCC, and is the author of Doing Good: The New Rules of Corporate Responsibility.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.