At yesterday’s hearing of the Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights entitled, “The Impact of Consolidation and Monopoly Power in American Innovation,” committee members and witnesses praised the spoils of capitalism, but then went on to dismiss the harmful, unintended consequences of intervening in markets and antitrust regulations.
The idea that the countless decisions and dispersed knowledge of markets—which are currently delivering record rates of start-ups, huge R&D investments and innovations like decentralized social media—could be micromanaged by regulators without costs to innovation, profitability, and consumers is contrary to history.
The lone witness cautioning against government intervention, software entrepreneur Bettina Hein, rightly discussed the real-world failures and harms of the Sarbanes-Oxley Act and the Dodd Frank Act in making IPOs more expensive and “going public” less likely—and being acquired becoming a more rational goal for many startups. Her comments were met with a “good intentions” defense by Sen. Dick Durbin (D-IL), but pure motives don’t automatically make good public policy.
The Platform Competition and Opportunity Act (S. 3197) will have similar unintended consequences if enacted. The profitability of being acquired is now a critical incentive for entrepreneurs to take the risk of starting a new company. To foreclose or diminish that opportunity with regulatory restrictions will reduce the number of new firms founded and funded.
Antitrust regulations are not immune from the dangers of unintended consequences just because the stated intent is to “protect competition.” In this case, that means less innovation for consumers and less competition for industry incumbents.