COVID-19 has reversed economic growth and cost millions of Americans their jobs. In May, 13.3% of Americans were unemployed and looking for work. Yet, instead of working to bolster and create jobs, some of our leaders are hurting economic growth.
The tech sector supports 18 million jobs and accounts for 12% of U.S. GDP. And while the pandemic has hurt some tech companies, others – such as Amazon, Facebook and app-based delivery services such as DoorDash – have created even more jobs to meet the needs of a socially distanced society. Indeed, as Wall Street reflects, tech is the brightest spot in the economy today.
So, does it make sense in the middle of this national mega-crisis to self-immolate and to attack the one industry making American lives better and creating jobs for millions of Americans? These same tech companies are leading the world in battles for innovation supremacy! We need them to focus on the revenue and jobs they generate to keep our economy going during this crisis.
And yet a few powerful federal leaders are on an economic suicide mission designed to distract, divert and choke a few of our best companies, hurting not only them, but their employees, and the pension funds and mutual funds that have invested American dollars in their success. Worse, they have tried to stifle companies from acquiring other companies, thus starving the investment pipeline, which will make venture capitalists less likely to invest in start-ups.
Here are a few examples:
After a year-long investigation, the House Judiciary Committee is expected to release an antitrust report on major tech companies, including Amazon, Facebook and Google.
Elected officials in both the House and Senate called for a ban on large mergers during the pandemic. And the Justice Department recently informed an appeals court that private parties can challenge a merger, even after the deal is complete.
Yet, for over four decades, the Hart-Scott-Rodino (HSR) Act of 1976 has required companies to notify the FTC of significant acquisitions. The notification process served to allow government information gathering and antitrust scrutiny. It was a fair approach to preserving competition and, no matter which party was in charge, served regulators, interest groups and businesses seeking to expand, achieve efficiencies and compete globally.
But in mid-February, the FTC broadened its request, demanding that five of America’s biggest and most successful companies – Alphabet, Amazon, Apple, Facebook and Microsoft – share information about all their acquisitions from 2010 to the end of last year. This unprecedented and broad mandatory lookback is not only an abuse of governmental power, but it is also downright harmful to five of America’s most successful companies, whose combined market capitalization accounts for more than $4.4 trillion.
The FTC insists that order is merely to gather information and isn’t intended for “law enforcement purpose(s).” But the goal of the investigation is to determine whether “large tech companies are making potentially anti-competitive acquisitions.” For big acquisitions, the agency had the HSR filings, and they had the opportunity to act before the merger. Now the FTC is trying to set new standards and retroactively apply them to legal actions these companies made years ago. It is simply wrong, unfair, and frankly, un-American to look back and create new standards and say something is illegal after it had undergone government review. Vague and ambiguous laws and retroactive enforcement are what we get from China – American companies should not get it from their own government!
Of course, there’s no denying the tech landscape has changed since 2010. New competitors like Zoom, Snapchat, Uber, and Airbnb have come on the scene and made us better.
New times call for a review of old rules to make sure they still make sense – no one is disputing that. What doesn’t make sense, however, is penalizing these companies for not following so-called anti-competition rules that didn’t even exist in the first place.
And it makes even less sense to muzzle companies creating jobs and making acquisitions during a time of mass unemployment. Start-ups across America are suffering due to the pandemic, laying off their employees and delaying initial public offerings.
What the FTC’s backward audit and legislator calls to block acquisitions are totally missing is that the entire financing of innovation in this country depends on an ecosystem where early investors have a chance at a return. That return can come from fast growth like Zoom has had, but otherwise, it can only come from being acquired or going public. Being acquired is the most common investor exit strategy. The biggest companies can and should be best positioned to help the investors and founders and years of employee effort result in a payoff. As it is, most start-ups fail. Taking away the largest corporate investors means more start-ups will simply close their doors. Large companies can help reinvigorate smaller start-ups by putting greater resources behind a product.
Our antitrust regulation has taken a consumer-focused approach. The more competition, the more consumers benefit, as companies push to deliver better products and more choices at lower prices. Consider the fierce competition among digital assistants, TV brands and smartphones.
Comments some are making and the FTC’s demand to look at past acquisitions, however, indicate consumer benefit and traditional antitrust analysis may be less important than creating new legal theories.
We urge leaders to consider the purpose behind their antitrust efforts. Creating a fair and equitable tech ecosystem is a worthy goal. But the way to achieve that goal is by looking forward and addressing present challenges like disease and unemployment – not peering backward and revising rules that helped enable our nation’s global tech leadership and create millions of jobs.
America’s technology companies – the world’s leading innovators – want to work with policymakers to craft smart, effective, predictable rules that create jobs, improve public health and foster innovation. Now is the time for industry and government to work together.
Gary Shapiro is president and CEO of the Consumer Technology Association, which represents more than 2,000 consumer technology companies, and a New York Times best-selling author. He is the author of the book, Ninja Future: Secrets to Success in the New World of Innovation. His views are his own.