Many activists, scholars, elected officials, and regulators in Washington warn that the rapid growth and far-reaching market power of large Internet platform companies such as Amazon, Apple, Google, and Facebook are stifling competition to the detriment of the economy. But a new report released today by the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy, finds that these concerns are largely misplaced.
“Critics raise alarms about online platform markets often having one or two dominant players, and they worry platforms could compete unfairly when they sell directly to consumers alongside third parties—but the critics underappreciate the economic benefits that come with network effects, and they overestimate the antitrust concerns,” said ITIF Senior Fellow Joe Kennedy, who authored the new report. “Internet platforms provide tremendous benefits by using their scale to reduce transaction costs as they bring together buyers and sellers. Contrary to the critics’ narrative, the most relevant market for many platforms—advertising—is highly competitive, and e-commerce platforms have far more incentive to attract third-party sellers than to displace them.”
Coming ahead of a July 27 House Judiciary Subcommittee hearing at which the chief executives of Google parent company Alphabet, Amazon, Apple, and Facebook are expected to testify, the report analyzes current market conditions and reviews scholarly economic literature and finds that Internet platform companies fail to exhibit key signs of monopolistic behavior. For example, instead of trying to increase their profits by artificially reducing the supply of services, online platforms are constantly innovating and creating new markets to attract and retain users. To do this, they invest enormous sums in research and development.
The report concludes that existing antitrust policy is adequate to deal with any legitimate antitrust problems involving online platforms. For example, the statutes readily encompass non-price issues such as threats to innovation or fair dealing.
“Antitrust policy should continue to focus on maximizing overall economic welfare, not on protecting companies from legitimate competition and disruption by business models enabled by new technology,” said Kennedy. “Issues that are tangentially related to the way online market platforms operate—such as privacy, data security, and political power—are best dealt with with policies other than antitrust.”
The Information Technology and Innovation Foundation (ITIF) is an independent, nonpartisan research and educational institute focusing on the intersection of technological innovation and public policy. Recognized as the world’s leading science and technology think tanks, ITIF’s mission is to formulate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity, and progress. Learn more at itif.org.