The Implications Of President Biden's Anti-Competition Executive Order : Planet Money : The Indicator from Planet Money President Biden signed an executive order promoting competition and large technology firms came under fire. We speak with economists Luigi Zingales and Carl Shapiro on the history and implications of antitrust.

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This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith. And it is Friday, time for Indicators of the Week. And this week, we thought we'd take a look at something that we at THE INDICATOR have been talking about all week. It started last Friday when President Biden signed an executive order promoting competition, specifically condemning what he called the anti-competitive actions of some of the country's biggest and wealthiest companies. So everyone from airlines to hearing aid makers came under fire. But, of course, everybody has been talking about tech, specifically FAANG, the Big Five - Facebook, Amazon, Apple, Netflix and Google - FAANG. So coming up after the break, we talk with a couple of our favorite economists about FAANG, antitrust and the most searched-for term on Bing.


VANEK SMITH: So to talk Big Tech, regulation and monopolies, we brought in a couple of our favorite economists - Luigi Zingales of the Chicago Booth School of Business and host of the podcast "Capitalisn't," and Carl Shapiro, an economist at the University of California Berkeley. He also served at the antitrust division of the Justice Department from 1995 to 1996.

So Biden - I guess it was a week ago today - signed this executive order, which seemed like a little bit of a sort of a shot across the bow for corporate America, like kind of a warning shot. What is happening in, like, tech boardrooms at the moment this announcement is made?

LUIGI ZINGALES: Honestly, I don't think that anybody is that worried. I am...


ZINGALES: Yeah, because - don't take me wrong. I think that...

VANEK SMITH: Executive order, signing - no?

ZINGALES: The rhetoric is beautiful. The statement, capitalism without competition isn't capitalism; it's exploitation - I could not have written better. It's fantastic. But if you go through the executive orders, first of all, many of them are encouragement. I understand that the bully pulpit is important in the U.S. government. There's very little thing that today are really binding and nothing that could not have been done without this executive order.

VANEK SMITH: I mean, Carl, do you agree with that?

CARL SHAPIRO: Well, I think that there's - the expectations now for what might happen are probably inflated. So I'm - I would agree with Luigi on that. What could change the industry would be FTC rulemaking if it were strong and stuck or legislation. Now, whether that would change the industry for better or for worse, we could talk about.

ZINGALES: What is interesting is the previous changes did not go through legislation. Of course, Carl knows, but maybe the listeners don't know. Antitrust was much more vague and gave much more leeway in the '60s and '70s. And toward the late '70s and early '80s, a group of thinkers that goes under the name of Chicago School of Antitrust decided that the best way to administer an antitrust was to focus only on one principle, which is consumer welfare. That makes it much more objective.

VANEK SMITH: Right, so this is the idea that regulating companies should focus on potential harm to consumers rather than on harm to competing companies.

ZINGALES: However, the side effect of that was that made it very difficult to bring cases that are important. So that change did not take place through legislation - took place through FTC guidelines and mostly a change in the economic thinking. No, you disagree.

VANEK SMITH: Carl is shaking his head (laughter).


VANEK SMITH: Jump on in (laughter).

SHAPIRO: Well, I don't think the change was FTC guidelines. That's where I was shaking my head. The courts have moved. I wrote - recently wrote a paper, Antitrust: What Went Wrong And How To Fix It, and it describes the Chicago School's enormous influence and much of it unhelpful. And we're now seeing the bad consequences of that in terms of making antitrust too weak. There are ways to fix that. But for the past 25 years, the courts have moved way too far towards a laissez faire approach, and we're now seeing the bad consequences of that. So it wasn't FTC guidelines. It was the courts. And it can be fixed by the courts, but I'm not very optimistic given who's on the Supreme Court and their views. And that - hence, you get back to legislation.

VANEK SMITH: Well, it's interesting - this idea of what a monopoly is and the idea of consumer harm. I mean, traditionally in a monopoly, you know, a company corners the market. They jack up the prices, and consumers have nowhere to go. I mean, that's sort of, like, the traditional, I think, what people think of when they think of a monopoly. Companies like Amazon and Facebook don't really impede consumer choice, and they're free. So, like, is this a monopoly, really? Are these monopolies?

SHAPIRO: I prefer the term dominant firm, actually, which is what the Europeans use. Monopolists makes it seem like there's no other competitors, you know? So take Amazon. Well, there's other competitors. There's other retailers, so who has a monopoly? A dominant firm notion - they have a great deal of economic power. That's what it conveys. So they may face some competitors who are smaller, but they can exclude or raise prices or cause harms. It's interesting. In the Facebook case, you know, the FTC says they have a monopoly. The judge says, well, you really got to make the case here stronger because I read it in the newspapers and everybody says it, but that's not good enough in court. So this is one of the challenges in antitrust. So each of these things is tricky. But what I'm trying to do is say there's a lot of economic power here, whether you call it a monopoly or not for antitrust and legal purposes. What do we want to do about that?

ZINGALES: It's not only the question of monopoly. It's the question to what extent the traditional role that competition plays in the marketplace is affected. So let's consider a case that is in front of the German court today because it's very interesting. It's about the role that Google plays in directing consumers. The German court is concerned that as Google, for example, moves from searches to providing information on the site, they might actually be the ultimate person deciding who wins in the marketplace.

VANEK SMITH: But couldn't you argue that if Google started giving us bad answers, that we would just switch to another service?

ZINGALES: I think that if all the answers are bad, probably eventually you will start to. But, first of all, have you tried to use any other competitors?

VANEK SMITH: I have not.

ZINGALES: You have to use Bing. You know that the most searched word in Bing is Google because people are trying to get out of there as fast as possible. OK? So (laughter)...

VANEK SMITH: (Laughter) Get me out of here.

ZINGALES: So I think that they are by far the best. OK? There is no question about it.

SHAPIRO: I think the story you've told - I agree with you, Luigi. Google's invested enormous amount of money. They got by far the best search engine, and that's competition - they've succeeded in competition at search. And what do we want to do from a competition point of view? We want to make sure that other competitors are not blockaded, OK? We don't break up companies just because they've been successful and powerful.

I think where you want to go is regulate them. You want to say it's such a powerful, durable monopoly that we want to regulate them. And then the question becomes, well, who's going to do it? Is it going to be the Federal Trade Commission? Who's going to do it? Who's going to decide what the search results should look like, OK? And I'm not sure who's going to do that better. You could then look and say, well, how badly is Google doing? I don't know the answer to that. But if that's going to be regulated, it's not an easy thing to do.

VANEK SMITH: I mean, is it a bad thing if the regulation doesn't happen? I mean, these are companies that have generated enormous amounts of wealth. They've created a lot of jobs.

ZINGALES: Oh, I think that the real danger is that the political system will get in cahoots with the Big Tech to basically create an autocracy where information is selected in what you can hear and read in the newspapers. And people are shunned from the internet, OK? And that to me is super-super-dangerous. And to me, the worst thing that can happen is an under-the-table agreement between the political power and the business power. That's the reason why I think that regulation is necessary, is a much better thing because at least it's transparent.

SHAPIRO: You know, we're talking about - this is not about competition. This is about something broader about the political system and the media now. We're talking about it in sources of information. So having some public oversight seems desirable to me. But I keep saying it's hard. And when I say it's hard, it doesn't mean we shouldn't do it. It just means we should be realistic.

VANEK SMITH: This episode of THE INDICATOR was produced by Brittany Cronin with help from Gilly Moon. It was fact-checked by Michael He. The INDICATOR is edited by Kate Concannon and is a production of NPR.


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