Should Big Tech be broken up?
The dominance of the big four technology giants has attracted the attention of politicians determined to humble them. But what real harm are they doing?
What has happened?
The question of breaking up Big Tech is back on the agenda following last week’s grilling of Silicon Valley’s top bosses (via video link, appropriately enough) by US politicians. David Cicilline, the Democrat chairman of the House Judiciary Committee’s antitrust subcommittee, kicked off the hearing on “Online Platforms and Market Power” with the assertion that: “Our founders would not bow before a king. Nor should we bow before the emperors of the online economy”. That set the combative tone for several hours of sharp questioning of Jeff Bezos of Amazon (see also page 21), Tim Cook of Apple, Sundar Pichai of Google and Mark Zuckerberg (pictured) of Facebook, whose four companies have a combined market capitalisation of around $5trn – roughly equivalent to the GDP of Japan. Republicans focused on the alleged stifling of conservative viewpoints on social media; Democrats focused on anti-competitive practices by the “cyber barons”.
Is this more than sabre-rattling?
The hearings did feel like a watershed, says Margaret O’Mara in The New York Times. Given the historic embrace of Silicon Valley by Washington from the 1970s onwards, the intense hostility and precision of some of the questioning was remarkable – and brought to mind previous “seminal” grillings of car-industry bosses in the 1960s and Big Tobacco in the 1990s that presaged major regulatory clampdowns. But here’s the thing – “cigarettes killed people. Cars were unsafe”. By contrast, the dangers of Big Tech for consumers are far less clear-cut: “misinformation, an incomplete search result, an unfairly promoted link, privacy erosion, a skewed algorithm”. We might all wish we used our smartphones less, or worry about what social media is doing to public discourse, but “we still routinely check our Facebook pages, buy apps via Apple, and click ‘buy’ on Amazon Prime”.
What exactly is Big Tech accused of?
Abusing its monopoly power unfairly to stifle competition. For example, Facebook was accused of adopting a “copy, acquire, kill” strategy to “destroy” any start-up that could prove a rival. Amazon was accused of exploiting its access to the proprietary data of third-party sellers using its marketplace to drive competitors out of business. Apple was accused of using its power over developers who rely on its App Store to take an unfair share of their profits and target software that threatens its own. And Google was charged with poaching other sites’ content to improve its own products, then working to drive the other sites into obscurity. In short, says The Washington Post, Congress argues that these companies “exploit their dominance in various marketplaces to maintain their dominance” over would-be competitors.
Isn’t that a normal business strategy?
Only within the law. In recent decades antitrust law has been mostly interpreted as protecting consumers from abusive pricing power (the “consumer welfare” standard) rather than business competitors from aggressive tactics. But even if existing laws can be used to rein in the anticompetitive antics of the four firms, argues John Naughton in The Observer, they are “obsolete” in relation to their conceptions of “consumer harm” from monopolistic behaviour by companies – such as Google and Facebook – that don’t directly charge consumers for their services. Moreover, existing laws say nothing about “societal” harms such as undermining elections or “polluting the public sphere”. The key question facing legislators, then, says The Washington Post, is whether antitrust law now needs updating for the digital age, when “big data skews what regulators thought they knew about pricing, and when unforeseen and often immeasurable harms may arise from the concentration of too much control in too few hands”. US lawmakers report back next month with their conclusions. Chairman Cicilline’s is already clear: some of the four “need to be broken up, all need to be heavily regulated”.
What’s the case for break-up?
Monopolies, however arrived at, stifle innovation and harm consumers in the long run. The tech giants “wield unaccountable power and curb competition” and “give capitalism a bad name”, says Oliver Kamm in The Times. It’s time, therefore, to confront them and break them up. On the other hand, argues Jeremy Warner in The Daily Telegraph, for all those start-ups that claim to have been “taken down by an abusive Big Tech, there are hundreds of others for which these platforms have been a godsend”. New industries do tend to become dominated by a small number of big players – and that’s “particularly the case with tech, where powerful network effects are at work”.
Does Big Tech really crush competitors?
Look at the examples cited by Congress, says Warner – namely Instagram, WhatsApp and YouTube. All were “in their infancy” when acquired by Facebook and Google. At the time he was acquiring Instagram, Facebook’s Mark Zuckerberg was “ridiculed for the apparently extravagant” $1bn price tag, and US regulators waved the deal through. Why should he now be penalised for making a success out of a clever acquisition? “Much business would cease if we were to apply that logic widely.” To make a case for break-up, you have to show actual positive benefits to consumers, competition, and innovation. It’s not remotely clear why (say) separating Amazon’s servers business from its retail operation, or Facebook from Instagram, would benefit anyone. Breaking up Big Tech is “emotionally appealing”, but in practice probably not worth the hassle, says James O’Malley in The Spectator. Greater regulation is almost certainly coming, but, “perhaps channelling the spirit of Silicon Valley, that regulation will have to be much more innovative” than existing antitrust laws.