Washington — A comprehensive economic study by National Economic Research Associates (NERA) finds that proposed antitrust legislation in Congress could cost the economy $319 billion. The result would be increased costs and loss of services for consumers, small businesses and other users of the bills’ target companies — Google, Facebook, Apple, Microsoft and Amazon.
The study also finds the proposed bills would force targeted companies to divest, eliminate or reduce the scope of services, including Amazon Prime. NERA measured the bill’s effects of higher retail prices and the loss of services of Amazon Prime and found a consumer value loss of $22 billion per year for Prime members – a harm of $148 per Amazon Prime subscriber per year. The study concludes that the bills are not in the public interest and provide no offsetting benefits: bills would not stabilize prices or reduce inflation; instead, they would reduce American innovation and entrepreneurship and harm U.S. companies more than foreign companies.
The study, commissioned by the Computer & Communications Industry Association, is the first to quantify the economic costs and benefits of the various antitrust bills introduced in the House and Senate, spearheaded by Representative David Cicilline and Senator Amy Klobuchar. The full report can be found here and 1-page summary here.
The proposed bills target companies that operate online platforms or marketplaces above specified size thresholds, without requiring any demonstration of anti-competitive behavior or consumer harm. The targeted companies – Google, Facebook, Apple, Microsoft, and Amazon – would be forced to “structurally separate,” or break up, and incur increased operating costs of $319 billion to comply with the bills. In order to stay profitable, the smaller, independent companies would likely pass the costs on to consumers in the form of higher retail prices and the loss of free services.
Additional Key Takeaways:
- The bills would prohibit companies above a certain size from acquiring startups, leading to a 12% decrease in venture capital financing for startup firms.
- The bills stand to impact at least 13 additional companies that are already close to the bills’ size thresholds, including Walt Disney, Netflix, and Home Depot in the next 5 to 10 years. Over 100 U.S. companies would likely be impacted by the 2030s.
- The bills would not cover foreign firms doing business in the United States until those foreign firms had 20 times as many users as a U.S. firm, meaning American companies would be far more impacted than foreign-based companies.
The following can be attributed to study author Dr. Christian Dippon, Ph.D. economist at NERA:
“These bills are ostensibly intended to target only large U.S. tech companies, but in reality, would have economic repercussions on small businesses and everyday products and services that U.S. consumers value. Not only would restricting online platforms and marketplaces increase costs by over $300 billion to targeted U.S.companies, but would negatively impact an additional 13 U.S. companies in the short term and 100 U.S. companies over the next decade who are not the primary targets. As just one example of the consumer effects, if the bills forced Amazon to discontinue or reduce the services presently included in the Amazon Prime membership, we estimate that each Amazon Prime member would lose $148 in value each year, or $22 billion per year in aggregate. These bills would further discourage the growth of U.S. startups and jeopardize the international competitiveness of U.S. firms.”
The following can be attributed to Trevor Wagener, CCIA Director of Research and Economics:
“This is the first, and only, economic study to offer policymakers concrete data and quantified costs and benefits of proposed legislation that could fundamentally reshape antitrust and competition policy in the United States. The study shows that these bills would harm American consumers when they are already reeling from the highest inflation in four decades. Moreover, increasing operating costs for U.S. companies would be counterproductive in the fight against inflation, the administration’s top domestic priority.”