It Might Be Time to Break Up the Tech Giants, Minneapolis Star Tribune
“I don’t know what a monopoly is until somebody tells me.” — Steve Balmer, former Microsoft CEO
The U.S. economy is dominated by three companies — Amazon, Google and Facebook, all founded in the past 25 years. Each of these platforms has changed our lives, to the point that it is difficult to imagine life without them.
All of these companies are increasingly being challenged as too powerful. Each has an overwhelming U.S. market share of their industry: Google with 75 percent of web searches, Google and Facebook combined for 73 percent of online advertising, and Amazon with 44 percent of online shopping.
The Sherman Act of 1890 outlawed monopolistic behaviors. Having a majority market share does not in itself violate antitrust law. Rather, it raises the sensitivity with which competitive behavior is judged. Once a firm controls more than half its market, it has the ability to crush smaller competitors. Metaphorically, a sharp elbow by a skinny teenage athlete is less dangerous than by a muscled giant. One bruises; the other might shatter your skull.
A small or medium-size firm can attempt to impose exclusive bundling agreements on its customers and partners. But it is only with a majority market share that competitors and partners can be bullied, because they have limited alternatives.
Some companies pretend ignorance of the law. Two decades ago, Microsoft spent several years acting as if there were no such thing as antitrust law, blundering about like a bull in a china shop before being stopped by the Justice Department in 1998. In contrast, other tech giants like IBM and Intel were more subtle and aware of their status as industry behemoths and generally avoided seriously attention from government regulators. What sort of market behavior has raised this issue to its current high profile?
1. Amazon continues to aggressively pursue new online industries, in groceries (Whole Foods), prescriptions and even event ticketing. Whole Foods was barely making money as a public company. Given the much-publicized reduction in prices at Whole Foods after Amazon’s acquisition, it is very likely Amazon is subsidizing Whole Foods’ business to gain market share, a violation of antitrust law.
Amazon has also been in the news after President Donald Trump attacked the company for taking advantage of U.S. Postal Service discounts, though this is a tactical issue compared to Amazon as a market force.
2. Google, as described in a recent New York Times article, is fighting a series of lawsuits by small competitors who innovated better than Google in search technologies and found the monolith subverting their ability to be found online by potential customers. Some have even credibly alleged that Google has stolen intellectual property.
3. Facebook’s role in the Russian fake news scandal during the 2016 election continues to escalate. Mark Zuckerberg’s testimony before Congress was a bold reminder that selling users’ personal information to outside vendors is core to Facebook’s business model, not an aberration.
All of this may seem like a political dispute. In truth, these giants have few ideological supporters. Both left and right are concerned about fake news. And neither business supporters nor progressives desire a society dominated by a handful of industry giants and their billionaire founders. History suggests society will break up this concentration of power, as it did a century ago with Standard Oil.
What might the results look like?
Google and Facebook may be treated as public utilities as the primary conduits for society’s personal information. This would entail far less secrecy in their algorithms and in how they leverage consumer information. Both may also be constrained in how they monetize the original content of others, whether individuals on YouTube or newspapers on Facebook.
Amazon could be broken into pieces, like Standard Oil. Moreover, Amazon may well be aware of its potential disassembled future, but like John D. Rockefeller a century ago, would rather continue to grow and ultimately be broken up into a bunch of highly valued companies than become passive competitively out of fear of antitrust action.
It may be that antitrust is too narrow a perspective by which to assess these super-platforms, which impact so much more than competition — privacy, freedom of speech and political manipulation. Looking at this dynamic from that wider angle is another conversation to be had down the road.