Changes to U.S. antitrust laws could hamper innovation

Technology powerhouses like Google, Facebook and Amazon are facing increased regulatory and legal scrutiny by foreign and domestic governments, which could result in significant changes to the way they do business.

Aurelien Portuese, director of antitrust and innovation policy at the Information Technology and Innovation Foundation, supports regulatory efforts. But he also said he believes changing U.S. antitrust laws such as the Sherman Antitrust Act, which prevents monopolization, and enacting broad regulations against acquisitions are misguided. He cautions that new regulations could affect not just big tech companies, but the technology industry in general, especially innovative startups that need bigger companies if they're going to make it.

In this Q&A, Portuese discusses the downside of sweeping changes to U.S. antitrust laws, including Senator Amy Klobuchar's recently introduced antitrust reform bill; explains why regulators should be cautious about breaking up big companies; and talks about how countries like Australia and France, which are looking closely at the relationship between big tech and news agencies, could influence regulation in the U.S.

You've talked about how changes to U.S. antitrust laws that make acquisitions unfeasible would have a negative effect on innovation. In what way?

Aurelien Portuese: Being acquired is one of the driving rationales for startups. To cut off this ability for innovative companies -- innovative startups -- to be bought by Google, Microsoft, Amazon, Netflix, whoever, it deters innovation and deters, also, the ability for these startups to gain scalability that is crucial and necessary.

Aurelien Portuese

I think we just completely overlooked the dynamics of the industry. Of course, some mergers might be anticompetitive, and that's why we need antitrust forces to look at that. But to make them, per se, automatically illegal is just one way of preventing these startups from gaining the necessary scalability they require.

There are calls to reform U.S. antitrust laws such as the Sherman Antitrust Act, legislation enacted in the late 1800s. Do you support those efforts?

Portuese: Antitrust is a case-by-case analysis; there are no two cases that are alike. We conduct a case-by-case analysis and that needs to remain. That's why we have broad rules such as the Sherman Act, which have been in place for a century. The arguments that say, 'This is a new economy, we need to have new rules,' that's wrong and misguided. The internet has existed for the last 30 years; these arguments were made in the 90s for Intel, Comcast, AT&T and Microsoft, and they never convinced the regulatory to depart from the Sherman Act.

I think the Sherman Act is the economy's constitution. … It's deemed general rules to be applied in a casuistic manner. It's as if we were complaining about the U.S. Constitution being too broad. A constitution doesn't have to be precise -- it just lays down general principles, which are applied by judges.

Governments in other countries are making moves to funnel money back to the news industry. Will what's happening in places like Australia and France shape regulation in the U.S.?

Portuese: Yes. One very important instance would be the Australian initiative on regulating Google and Facebook news. Australian members of parliament want to enact a bargaining code on news, between the news publisher on one hand and Google and Facebook on the other, forcing the latter to pay for snippets they publish on their platforms.

If there is a coalition of news publishers in the U.S., if some advocates are effective enough to organize and coalesce U.S. news publishers, they might very well lobby the government or members of Congress to have a similar result. This is what happened in Europe, where Google was fined and compelled to pay French news publishers a few months ago. That's what's going to happen in Australia, and that's what is, perhaps, expected in the U.S.

How are you thinking about the regulatory road ahead for technology companies like Apple or Amazon?

Portuese: I think things are getting even more dramatic than I would've expected a few months ago in the sense that structural remedies against big tech that were once not fully studied and advised are now completely on the table. That's what Senator Amy Klobuchar is saying and is about to write in her forthcoming book. So, I think over the next few months [and] years, to avoid structural remedies [such as breaking up companies] would be most important.

Editor's note: Responses have been edited for brevity and clarity.