President Joe Biden kicked off the month of July with a bang, signing a sweeping executive order (EO) aimed at promoting competitive markets across the U.S. economy and limiting what the White House has described as corporate dominance that puts consumers, workers and smaller companies at a disadvantage.
The EO is quite lengthy — 72 initiatives in all — but at base is a playbook for how various federal agencies should, in the administration’s opinion, use their authority to curb consolidation and how data are collected and used across a number of industries, including Big Tech.
It’s a move that lacks any real power to force change, since laws would also have to change to give regulators the authority to enforce the “considerations” and “encouragement” that constitutes the EO.
It’s also a move that i2c President Jim McCarthy likened to “pushing on a rope” because this stab at limiting Big Tech isn’t grown organically from a set of consumer demands or complaints. He told Karen Webster that consumers aren’t screaming about the need for change, maintaining it’s an issue that’s mainly the topic of conversation of media talking heads and beltway insiders, and not always with a grasp of the downside of regulating Big Tech.
“I’d love for someone to point me to just one regulation that went the way they thought it would,” McCarthy said, noting the Durbin interchange rules passed over a decade ago in the wake of the financial crisis certainly didn’t.
The Durbin Amendment regulated the fees large banks could charge merchants to accept debit cards, which was touted as a way to lower consumer prices since merchants would save on payment acceptance fees. That never happened because the savings it netted merchants as a give-back to consumers, assuming they did, were measured in pennies and consumers never noticed.
The unintended consequence of the act was to raise the price of financial services for consumers quite dramatically since banks had to radically retool their business models around areas they were still allowed to make money, he said. Debit interchange helped defray the cost of maintaining the checking accounts those cards were linked to, and even helped fund rewards, which no longer exist at large banks.
Instead, the price of acceptance for merchants on credit cards went up, and card issuers have been trapped in an expensive rewards war ever since, he said.
McCarthy said that looking at the full picture, it is very hard to see what anyone was actually protected from in the end.
The idea that the EO is something the government is looking to do to protect competition between businesses, he said, seems quite out of sync when looking at the facts.
“You’d be hard pressed to argue that the companies they’re attacking haven’t completely changed the way commerce and payments are done, or the access to information and access to goods … these services [have] driven,” he said. “It’s been competitive, and it’s driven prices down.”
McCarthy went on to say that although Facebook is massive and powerful, his own kids — and their friends and friends of friends — have moved on. They’ve decamped to relative newcomer in the social media space TikTok, which was invisible a few years ago. Markets work when competition encourages everyone to up their game, and consumers ultimately decide.
Instead, the motivation seems to be about governments picking winners and losers and deciding centrally how big and successful firms “should” be.
This isn’t a U.S. only problem, so much as a case of bureaucratic “innovation” that is an oddly contagious thing across national borders, he said.
China is notably in the midst of punishing its biggest tech firms for being too big and powerful. Europe has had U.S. Big Tech in its crosshairs for years, levied huge fines on Google and forced changes to its business model to advantage rival Bing. Yet despite that, Google remains the dominant search provider in the EU because consumers have a choice, and they choose Google.
The Lasting Effects
Facebook’s recent definitive win in a case brought by the Federal Trade Commission (FTC) on June 28 to the Federal U.S. District Court for the District of Columbia suggests that for all the enthusiasm among Capitol Hill insiders for a Big Tech crackdown, they still have a lot of work to do to make their legal case. Time travel and 2020 hindsight turns out not to be solid legal framework for anticompetitive behavior, and for all the attention the president’s new EO is getting, it doesn’t pack a punch unless new laws give it one.
“It will make life harder for these companies, for sure,” McCarthy said. “But someone’s still got to pass some legislation to change the antitrust laws. And that’s a lot harder.”
He said it might well take some time for this to work its way through Congress, and potentially well into a new presidential administration.
And until that day comes, if it ever does, he said he expects to see consumers do what they always do as legislators pontificate and talking heads bloviate. They’ll just keep right on playing through, leveraging the services they want, need and perceive make their lives run better on the whole.
“Unless you’re sitting inside the beltway or a talking head on television, the world’s playing through,” McCarthy said. “Consumers are playing through, and businesses are playing through. “It’s incredible to see. This EO? It is noise. This is D.C. talking to itself.”