During a House Judiciary Committee hearing on Wednesday, Rep. Scott Fitzgerald (R-WI) questioned Jessica Melugin, the Director of the Center for Technology & Innovation at the Competitive Enterprise Institute, about the consequences of over-regulating artificial intelligences.
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NewsTranscript
00:00Thank you very much, Mr. Badoglio, and I'll proceed under the five-minute rule with questions.
00:04I'm going to recognize myself.
00:06In recent remarks at the AI Summit in Paris, Vice President J.D. Vance stated that AI presents
00:12the extraordinary prospect of a new industrial revolution, but it will never come to pass
00:19if overregulation deters innovators from taking the risks necessary to advance the ball.
00:25He was referring to the European Union's Digital Markets Act and AI Act.
00:31Ms. Maluzian, why would replicating Europe's heavy-handed regulation of AI in the U.S.
00:38certainly be maybe unwarranted or even premature?
00:41Yes, it's kind of the European Union to have run this experiment for us.
00:47It has not gone well.
00:50Their first big attempt at digital regulation, the GDPR, ended up hurting the entire industry,
00:56but mostly hurting the little guy disproportionately, which we would see the same up here with a
01:00lot of the regulatory moves.
01:03The big, entrenched, accused monopolists or just market leaders, depending on your perspective,
01:09might have the resources to comply with a lot of those regulations, but the runway's
01:14not clear for the next big success story.
01:17And that's what you have to keep in mind, that a lot of times the companies that have
01:20a seat at the table might be able to make this work, but we don't know what's being
01:24developed in someone's garage right now that could be the next big thing.
01:27I think that goes to the general approach in Europe, which has been that if you're chilled
01:32in your innovation by worrying that everything you do, every new business arrangement, every
01:37new idea could be running afoul of one of the many, the DMA, the DSA, the GDPR, it just
01:44has an overall chilling effect on that industry, and of course, relatedly, on investment in
01:50that industry.
01:51And frankly, the US really doesn't have that time.
01:55If China, I don't think it's an overstatement to say they're nipping at our heels in terms
02:00of the AI race.
02:02And what those companies and those industries are doing in China is not the regulatory framework
02:10you see in the US, but it's also very much not the one you see in the EU.
02:14And it's no coincidence that you find all three of those segments in a different order
02:18of success, and we want to make sure we keep ourselves out front.
02:23As I said in my testimony, the European Union doesn't have one of the top 10 global businesses,
02:28and again, that's not to say that the small companies aren't important, too, to develop
02:31here in the US, but you certainly need the scaling abilities of large companies, the
02:36research and development resources of these large companies.
02:39You want a healthy ecosystem with the big guys and the small guys, and adopting a European
02:43approach won't allow that to happen at either level here in the US.
02:47So the Netherlands-based software firm Bird, which has been recognized kind of globally
02:53at this point, is moving out of the EU as a direct result of the AI Act.
03:00What they said was that Europe regulators are just killing innovation within the EU.
03:06So you think there's lessons already that can be learned here in the States from what
03:10we've witnessed on some of these examples of what's transpiring overseas?
03:15Yeah, I don't even think you have to abstract very much.
03:19I mean, the EU AI Act that those regulators bragged about being the first to regulate
03:25AI, which to some of our ears doesn't sound like something to brag about, means that a
03:30lot of the US companies that rolled out AI products that consumers have found incredibly
03:35useful have been very popular here in the US.
03:38They were delayed in Europe because they weren't sure that they could comply with all the rules
03:42and regulations.
03:43So at the worst case scenarios, you don't get those innovations, your constituents don't
03:47get those services and those tools.
03:49The best case scenario is that they're delayed because of regulatory overview.
03:53And again, that's an example where the little guy who's innovating something new maybe doesn't
03:57have the team of lawyers that the big guys do.
04:00So I don't think we want to set up that dynamic here in the US.
04:03Very good.
04:04Dr. Coniglio, you just cautioned against over-regulation in your testimony.
04:09You note that robust antitrust enforcement to promote customer welfare and innovation
04:16to remain a policy focus.
04:18Can you just elaborate kind of further on that point?
04:21Absolutely.
04:22Thank you for the question.
04:24So Ms. Maluzian pointed out the lessons we learned from regulation.
04:28And I would note the US also has some lessons that it learned from deregulation about how
04:31deregulation can spur economic growth and innovation.
04:35But there's also a very important story to tell regarding competition policy, and specifically
04:38two different approaches that were taken over the past 40 years between America and Europe
04:43on competition policy.
04:45And at a high level, Europe's approach was very much focused on protecting competitors.
04:50So it wanted to see markets where there were a lot of small firms.
04:53America's approach was focused on not condemning size in and of itself, but focusing on consumer
04:58welfare and innovation.
05:00And I think if you look most recently at the Draghi report that was issued in Europe,
05:04it was very clear that the digital revolution that happened in America has really driven
05:09the productivity gap between the United States and Europe that's occurred.
05:13And I think antitrust is not the sole reason for that, but I think it's part of the reason.
05:17Because if you have an antitrust policy that's not conducive to innovation and consumer welfare,
05:23and instead focusing on protecting small competitors, you're not going to see the sort of dynamic
05:27innovation competition that's really driven the digital industry in America, and which
05:31in part can, large firms can also play a big role in driving that innovation.
05:37Thank you very much.
05:38My time has expired.