Will the US emulate China’s tech takedown?September 12, 2021
One of the world’s largest economies is cracking down on its tech sector after political leaders became frustrated with tech’s earnings, size, and independence. The government imposed stringent regulations and sharply limited tech’s freedom to innovate, sending the message that tech must ask for permission first — and perhaps still beg for forgiveness later.
Luckily, the aforementioned economy belongs to China, not the United States. In recent weeks, China punished Jack Ma’s Ant Group and other tech companies that offered new products without the government’s permission, often and at the expense of incumbents with close ties to the state. The government launched probes, blocked IPOs, forced restructurings, and issued a flurry of new regulations. To date, the results have been predictable: Even as China’s Communist Party has consolidated its control over the economy and squelched even the rumblings of dissent, the added scrutiny and uncertainty has spooked investors and halted product development.
China should serve as a cautionary tale for the U.S. Congress. Here at home, members of both parties are considering proposals that would give the federal government far more discretionary control over routine business decisions in tech and many other parts of the economy. Some bills would require the government to grant prior permission to private companies to merge or acquire other firms, reversing the current rule where mergers are presumed lawful and economically beneficial. Other proposals would “structurally separate” companies into individual lines of business and even abandon the venerable consumer welfare standard, which for four decades has served as an objective touchstone for antitrust law, widely embraced by both parties.
These ideas could discourage the types of investment and innovation that America needs to maintain its economic edge. America’s tech sector leads the world, at least in part, because of the stability and predictability of our legal and regulatory regimes, which reward new ideas, allow easy access to capital, and enforce laws based on objective criteria. Mergers and acquisitions, which are part of this dynamic economy, help to finance new companies and let larger companies to develop new products more quickly. When mergers raise competitive concerns, they are reviewed for their economic impact on consumers, rather than for their political impact on government officials and their favored constituencies.
These ideas also could damage America’s global technological leadership. In 2018 alone, for example, Amazon, Google, Apple, and Facebook collectively invested more than $35 billion in research and development. Full disclosure: the organization I work for is funded by big tech companies, including Facebook.
Perhaps ironically, for the United States to emulate China’s recent tech crackdown would imperil our ability to compete with China over the long haul. The…