Big Tech: The New Predatory Capitalism

Big Tech: The New Predatory Capitalism

The tech giants are menacing democracy, privacy, and competition. Can they be housebroken?

December 26, 2017

This article appears in the Winter 2018 issue of The American Prospect magazine. Subscribe here

We’re making the world a better place.”

The phrase is thrown around so often in the tech world that it became a punch line on the HBO satire Silicon Valley. Executives controlling the largest tech titans—Google, Amazon, Facebook, Apple, and Microsoft—might even believe it. But in a searing presentation at Business Insider’s IGNITION conference in November, New York University professor Scott Galloway explained that technology and progress have stopped traveling together since the days of the Apollo Project, even as scientists and engineers developed the most sophisticated tools known to mankind.

“What has the greatest collection of humanity and IQ and financial capital been brought together to accomplish?” Galloway asked the crowd. “To save world hunger? To create greater comity of man? I don’t think so. … Their singular mission, simply put, it’s to sell another fucking Nissan.”

Today’s technologists work at for-profit businesses, doing what for-profit businesses do in America—maximizing shareholder profits by acquiring functional control of markets, as well as intimate details of our lives. Big Tech makes aspects of daily life more convenient (if more fraught), but that’s not the same as making the world a better place. Mainly, the goal has become making more money, via more monopoly. And their success over the past decade has been so unprecedented and damaging that Galloway—a self-described “full-throated capitalist”—sees no choice but to break these companies up.

The five largest global corporations by market value are the five tech firms named above. Google has near-total dominance of the search market. Facebook welcomes two billion monthly users and manages six of the top ten social media apps globally. Amazon controls nearly half of e-commerce and over two-thirds of the emerging voice-activated digital assistant market. Apple and Google share control of the operating systems for mobile phones and tablet gadgets; add Microsoft and Amazon and you’ve covered virtually all electronic computing devices. Facebook and Google dominate digital advertising. Amazon is increasingly the only player for cloud services. Heck, I’m writing this story on an Apple MacBook, finding links through Google, and resisting the temptation to use the Amazon Echo in the next room. And the imminent end of net neutrality will give AT&T and Verizon new power to determine winners and losers—and the Big Tech monopolists will be the winners.

The effects of tech monopolization have been detailed, at book length, over the past year (see companion book review essay by K. Sabeel Rahman, page 104). We already know these firms have crippled entrepreneurship, by either buying out competitors or copying their features and using overwhelming market share to destroy them—tactics that would be familiar to the authors of the Sherman and Clayton antitrust acts. We already know they’ve concentrated economic gains in a few small enclaves, leaving large swathes of the country behind. We already know they religiously avoid taxes and cut special deals with intimidated public officials, burdening the rest of society. We already know their surveillance capabilities rival any in history, handing over a comprehensive profile of your every waking moment for advertisers and behaviorists to exploit. We already know the addictive qualities of their products have undermined social relationships, expanded divisiveness, and transformed what it means to be human. We already know their drive for profits ignores how their platforms can be weaponized, scarring millions and undermining democracy.

After an unconscionable period of naïve neglect, in which the public was dazzled by tech wizardry, Americans of all stripes have recognized that allowing Silicon Valley to take this much control was dangerous. Polls show the public still likes tech platforms but doesn’t trust them. Conservatives think Big Tech stifles their voices; liberals think Big Tech hobbled our competitive economy; both think they’ve abused power, and both are right. Politics has grown interested in monopolies, and particularly tech monopolies, for the first time in decades.

The question is no longer whether we have a problem with Big Tech; it’s what we’ll do about it. And there, we have a distinct lack of consensus. “It shouldn’t be so hard, right?” muses Franklin Foer, author of World Without Mind: The Existential Threat of Big Tech. “We’re at the earliest stage. There’s no white paper.”

Let’s try to remedy that. Let’s survey the sundry theories for how to tame the Big Tech colossus—whether through laws, regulatory oversight, taxes, or antitrust enforcement. Let’s test these ideas and see how they might fit together. Let’s try to construct a coherent strategy—one that will require the participation of experts, politicians, and the public to make it work.

 

The Beginning of a Backlash

“I think you do enormous good … but your power sometimes scares me,” said Republican Senator John Kennedy of Louisiana in October to the general counsels of Facebook, Google, and Twitter at the first major congressional hearing on Big Tech in years. The topic was Russian interference with the 2016 presidential election, but the testimony illuminated the platforms’ domination of large parts of American life, without any interest in managing that control. Malign actors could so easily penetrate platform defenses because there weren’t any. Facebook has five million advertisers at any one time; it couldn’t possibly vet them if it tried.

AP Photo/Virginia Mayo

Europe Does It Better: European Union Commissioner Margrethe Vestager speaking at a media conference in June. The EU's competition watchdog fined Google over its online shopping service.

Furthermore, tech firms have no incentive to interfere with the source of so much revenue. That’s why ProPublica could list discriminatory rental housing ads excluding races and ethnicities in 2016, and then again in 2017, after Facebook claimed to fix the problem. That’s why Google is purging videos and disabling comments on YouTube’s predatory, sexualized user content aimed at children, but not always removing the predators’ accounts. Allowing the narrowest possible targeting and the maximum possible targets has built the most lucrative ad mechanism in history, and it generates big bucks, even if the bill is paid in rubles.

The hearings were important more for their explanatory power than for the technicalities of election integrity. “The end of the story is not Russia hacking the election, but that gross harm exists,” says Marshall Steinbaum, research director at the Roosevelt Institute. It filled out the picture on these platforms, whose operations we understand as much as the proverbial blind man feeling around an elephant. “We need to make sure that the public fully understands the scope of the problem we face, and how it could be dramatically worse, given the speed at which these companies are growing,” says Lina Khan, legal policy director at the Open Markets Institute.

We don’t know how our data is handled. We don’t know how algorithms nudge us into certain apps or products. We don’t even have a confirmed figure of Amazon Prime memberships (recent estimates range between 52 million and 85 million households). There are nearly 270 million fake and duplicate accounts on Facebook, a number they quietly updated only in November.

Platforms like Google have invested heavily in the academic research establishment. The search giant has funded around 100 public research papers since 2009, with up to $400,000 in seed money for each, according to data from The Wall Street Journal. Most of the research papers failed to disclose Google’s funding; Google even gives notes on the studies before they get published. This academic payola tilts the debate about how these businesses work, and in whose interest.

Government can solve this information chasm, but millions in lobbying dollars help shield Big Tech from scrutiny. The Obama administration was captured by Google; his Federal Trade Commission famously declined to sue them in 2013 over favoring properties in search and mobile apps, defying staff recommendations. Part of the staff report got inadvertently leaked to The Wall Street Journal, but the FTC has rejected calls to release the full investigation.

Incentives have moved in the opposite direction. Silicon Valley’s congresswoman, Democrat Zoe Lofgren, has routinely defended the industry’s priorities. But now that she desires the Democratic ranking membership on the House Judiciary Committee, she’s requested a study on how Big Tech data collection affects competition. “Politicians are really recognizing it,” says Craig Aaron, president and CEO of Free Press, a consumer advocacy group. “You have Mark Warner, not a radical member of Congress, thinking, ‘Wow, when I talk Google and Facebook, my social media goes crazy.’”

Three senators have introduced bipartisan legislation to institute disclosure in online election ads. Another pending bill would allow victims of sex trafficking to sue websites that facilitate it. Such laws won’t put a dent in Facebook or Google’s business model. But they would remove the illusion that tech companies are powerless to police user-generated content, or be held responsible for it—and signal a power shift. “I don’t think shoring up issue ads at the FEC is the answer, but the goal is to make them sweat, to force them into the spotlight,” says Aaron.

A bigger pushback exists outside Washington. In Connecticut, Democratic Attorney General George Jepsen is investigating Google’s pervasive tracking of Android phone users without their knowledge, following similar privacy investigations into Apple Watch. And Missouri Republican Attorney General Josh Hawley has initiated a wide-ranging investigation into Google’s data collection and bias in search results. “We should not just accept the word of these corporate giants that they have our best interests at heart,” Hawley said in his announcement.

Investigators, ironically enough, employ the very innovation that powers Big Tech. “The same Big Data revolution that led to today’s state of play has also ushered in tools that provide more sophisticated crystal balls into what’s happening in the market,” says Luther Lowe, vice president of public policy at Yelp, a persistent Google critic. His company paid for a study by researchers at Harvard and Columbia that used Amazon’s Mechanical Turk, a crowdsourcing app where individuals perform menial computer tasks, to emulate Google searches with tens of thousands of responses. The results suggested that Google alters search to prioritize its own content (Google has contested that conclusion).

“The takeaway is any Joe off the street, any law enforcer or whoever, can walk up to a consumer-facing internet product and understand what happens,” Lowe says. The platforms enable their critics to scrape and analyze information, just like they do. And the bigger the data bundle, the more proof available on Big Tech’s distorting power.

 

Hail, Hail Europa

Europe has propelled past the United States when it comes to constraining the abuses of Big Tech. In June, the European Union fined Google $2.7 billion for steering web users to its shopping site, and investigations remain active over similar treatment on Android phones. European regulators fined Facebook for lying about whether it could match user profiles with phone numbers on its messaging acquisition WhatsApp. They demanded Apple repay $15.3 billion in back taxes in Ireland. And they forced Amazon to change its e-book contracts, which they claimed inappropriately squeezed publishers.

AP Photo/Rick Bowmer

Trust-Busted: In 2002, Microsoft Chairman Bill Gates had to testify at federal court in his company's antitrust case. The public trial led Microsoft to sfoten its aggressive strategy against rivals.

Unfortunately, these actions were treated mainly as the cost of doing business. The Facebook fine totaled not even 1 percent of the $22 billion purchase price for WhatsApp, and it allowed the two companies to remain partnered. Government policy, in effect, has “told these companies that the smart thing to do is to lie to us and break the law,” said Scott Galloway in his presentation. Google’s remedy in the shopping case still forces rivals to bid for placement at the top of the page, with Google Shopping spun off as a stand-alone competitor. This does weaken Google’s power and solves the “equal treatment” problem, but it doesn’t protect consumers, who will ultimately pay for those costly bids. “The EU got a $2.7 billion fine to hold a party and bail out Greek banks,” said Gary Reback, an antitrust lawyer and critic of the EU’s actions. “No amount of money will make a difference.”

However, one thing might: Europe’s increasing move toward data privacy. The General Data Protection Regulation (GDPR), scheduled for implementation in May 2018, empowers European web users to affirmatively opt out of having their data collected, with high penalties for non-compliance. Consumers will be able to obtain their personal data and learn how it is used. They can request that their data be erased completely (known as the “right to be forgotten”) as well as prohibited from sale to third parties. Platforms could not condition use of their products on data collection. A separate, not-yet-finalized regulation called ePrivacy would forbid platforms from tracking users across separate apps, websites, and devices.

Data is the mother’s milk of Big Tech. Nearly all revenue is derived from it, mostly from delivering valuable targeting information to advertisers. Platforms obtain not only basic data like location, age, and gender, but more intimate details embedded in social media posts, emails, files from data brokers, even third-party sites that happen to feature a Facebook, Amazon, or Google button. The platforms know how much money you make, what you spend it on, what you watch and listen to, whom you owe money to, and what you’re feeling, on a moment-by-moment basis.

There is legitimate fear that GDPR will threaten the data-profiling gravy train. It’s a direct assault on the surveillance economy, enforced by government regulators and an army of class-action lawyers. “It will require such a rethinking of the way Facebook and Google work, I don’t know what they will do,” says Jonathan Taplin, author of Move Fast and Break Things, a book that’s critical of the platform economy. Companies could still serve ads, but they would not be able to use data to target someone’s specific preferences without their consent. “I saw a study that talked about the difference in value of an ad if platforms track information versus do not track,” says Reback. “If you just honor that, it would cut the value Google could charge for an ad by 80 percent.”

Europe appears to view data privacy as a more fundamental right than America does. (Mark Zuckerberg famously said in 2011 that privacy is no longer a social norm.) Just recently, Congress nullified a Federal Communications Commission rule that internet service providers refrain from selling personal data to advertisers without consumer permission. But conservative Representative Marsha Blackburn of Tennessee has introduced legislation that would not only restore these rules for ISPs, but expand them to tech platforms, under supervision by the Federal Trade Commission. Requiring consent to sell data is weaker than a ban on data collection or a user opt-out. But any move away from the current model of selling any and all personal data would be positive.

A potentially bigger shift involves making data portable. Guy Rolnik and Luigi Zingales of the University of Chicago proposed in a recent New York Times op-ed that social media users should be able to re-route all their messages onto any platform, the way phone calls are re-routed regardless of whether AT&T or Verizon is the provider. Data portability is also part of GDPR in Europe. A variant would give users the option to set search algorithms to favor preferred sites, rather than having Google peddling its in-house products.

Portability would break one of the most powerful dynamics cementing Big Tech dominance: the network effect. People want to use the social media site their friends use, forcing startups to swim against a huge tide. Competition is not a click away, as Google’s Larry Page once said; the costs of switching are too high. But if you could use a competing social media site with the confidence that you’ll reach all your friends, suddenly the Facebook lock gets jimmied open. This offers the opportunity for competition on the quality and usability of the service rather than the presence of friends.

Interoperability wouldn’t be a novel requirement. In the 2001 AOL-Time Warner merger, the FCC forced AOL’s market-leading Instant Messenger (AIM) to be compatible with chats from rivals. This opened up AOL’s walled garden to other systems, taking as its premise that people own their relationship networks, not private companies. The companies just provide the lines on which those relationships traveled. Email also works this way.

AP Photo/Jacquelyn Martin, File

“I think you do enormous good … but your power sometimes scares me,” said Republican Senator John Kennedy of Louisiana in October to the general counsels of Facebook, Google, and Twitter at the first major congressional hearing on Big Tech in years. Here, Facebook's General Counsel Colin Stretch, Twitter's Acting General Counsel Sean Edgett, and Google's Senior Vice President and General Counsel Kent Walker, are sworn in for a Senate Intelligence Committee hearing on Russian election activity and technology. 

You could argue that without that interoperability, Facebook wouldn’t exist; it wouldn’t have been able to pull market share from an entrenched social messaging program like AIM, with hundreds of millions of users. The same concept could weaken Facebook’s stranglehold on the market. Maybe something better, something more dedicated to a superior user experience, would emerge. And maybe Facebook would have to work harder to avoid the fate of AIM, which shut down December 15.

 

Net Neutrality and Market Power

Net neutrality has been a core doctrine of fair use of the internet as an essential public service. FCC Chair Ajit Pai’s pending repeal of net neutrality rules technically only affects telecoms like Comcast or Verizon, but you’ll see its impact in which websites thrive. If only giant platforms can afford faster download speeds, even more barriers to competition rise. Indeed, Netflix already pays for faster speeds. Net neutrality repeal should accelerate the demise of the entrepreneurial web.

Big Tech has historically opposed net neutrality repeal. But in practice, when Trump’s FCC proposed repeal, the big platform companies took a far softer line than in previous years. They understand how tollbooths on the web could create barriers to entry for smaller rivals. In July’s internet “day of action” protesting repeal, Google merely placed a note endorsing net neutrality on its less-prominent public policy blog; Mark Zuckerberg posted a brief Facebook message; Amazon’s show of support could barely be found on its homepage. Facebook and Google only expressed “disappointment” when the FCC’s order was released. Serious lobbying muscle was not brought to bear.

There’s a compelling argument that neutrality ought to be imposed on platforms as well as internet providers. As gatekeepers with the power to highlight or suppress content, Facebook, Google, or Amazon should not have the power to pick and choose what gets attention and what doesn’t. Any lawful information or commerce should be able to reach those who want a look.

What does platform neutrality mean in practice? Harold Feld, senior vice president at Public Knowledge, distinguishes between common carriage regulation, which demands certain businesses treat all customers equally, and public utility regulation, which designates a service so critical that government must guarantee affordable access. Where you think the platforms sit depends on whether you consider them essential services, like electricity or transportation, or merely companies that should adhere to a nondiscrimination standard, like cable providers.

Tech platforms have made themselves essential—and they defy existing categories of public-interest regulation. Amazon is becoming indispensable to navigate the modern economy; even though e-commerce represents a small portion of overall consumer sales, it has become necessary infrastructure for thousands of sellers requiring access to Amazon’s platform to survive. The web doesn’t work well without Google search. Facebook has become a communications tool with greater reach than the phone. There is certainly a basis to apply the strictest regulatory scrutiny, though the idea of subsidizing access to Google or Facebook, a clear goal of universal access to public utilities, wouldn’t necessarily apply.

“The fundamental issue is neutrality,” says Marshall Steinbaum. “These are not neutral platforms. They have no way to function in the public interest.” That could mean restricting what Amazon charges vendors for access to its marketplace, or forbidding Google and Facebook from deliberately favoring in-house products over rivals. Information services like the platforms could be regulated like news providers, as Britain has suggested, forced to take responsibility for the content published. These approaches allow some level of market power, but limit the harms that inevitably follow.

Unfortunately, regulation often starts vigorous but fades. “It might work for a time when high-energy people come in, but then they go on and industry packs the regulatory commission,” said Gary Reback. Some think the judiciary represents a better venue. Hal Singer, an economist with George Washington University’s Institute for Public Policy, believes nondiscrimination could be enforced through an administrative law tribunal ruling on complaints on a case-by-case basis.

Section 616 of the Cable Act of 1992 established tribunals for cable networks claiming discrimination by distributors; decisions normally take a couple of years, rather than interminably long antitrust cases. Singer believes a Big Tech tribunal would fill gaps in enforcement, getting out from under “competition is only a click away” assumptions. Precedents would emerge and create certainty on where to draw the line. “The tribunal gives the keys to the complainant, it doesn’t rely on a bureaucrat being moved to act,” says Singer. “And it has no requirements of antitrust cases, like showing market power.”

Lina Khan doesn’t believe we need a new tribunal, just new law enforcers. “I think that is the FTC’s role. They have expansive power in their pocket to reach business practices that are anti-competitive,” she says. Indeed, Section 5 of the Federal Trade Commission Act grants open-ended authority to act. But in 2015, the commission restrained its own power in a “statement of principles,” saying it would interpret Section 5 narrowly, the same way the courts interpret the Sherman Act.

Brian Solis/Creative Commons

Mark Zuckerberg famously said in 2011 that privacy is no longer a social norm.

Sandeep Vaheesan, a regulatory counsel for the Consumer Financial Protection Bureau, explained in a University of Pennsylvania Journal of Business Law paper that Section 5 could give the agency far more power. “The FTC could say any firm with more than 40 percent of the market is presumptively anti-competitive,” Vaheesan said. “So instead of having to do careful market examination, there would just be a simple rule. You have dominance, you have to change.”

There’s also a role for the taxing power, offers Free Press’s Craig Aaron. For example, Google revenue between 2004 and 2016 has increased from $3.2 billion to $89.5 billion, while print newspaper advertising fell over the same period from $44.4 billion to $12.9 billion. (See companion piece by Kuttner and Zenger, page 22.) Maybe Google and Facebook, which benefit from hosting news links (three of every four inbound links to news outlets come from these two sites), could redress some of that market collapse, by paying small taxes on data or targeted advertising, which in turn could subsidize news media. “If they control the ad market, what transaction costs should there be to support public goods?” asks Aaron. “I’d put journalism on that list.”

But policymakers need to address the challenges of regulatory enforcement. Neutrality depends on seeing and understanding an algorithm that’s often invisible, and it can be difficult to establish a causal connection of bias. Plus, “discrimination is practically inevitable in search,” says Vaheesan. “Ultimately Google has to decide which ten links appear on the first page. So long as Google is allowed to own its own content, there’s a real risk that strong net neutrality principles will be violated. So you need some structural separation.”

 

Break Them Up

It’s assumed that tech giants rose to prominence by offering the most compelling content or superior technology. Less remarked-upon is how they resemble old-school conglomeration and monopoly. Google didn’t have its revenue model straight until purchasing online admaker DoubleClick, and it routinely obtains technology through acquisitions like Waze, YouTube, and Android. In 2011, Chairman Eric Schmidt boasted of Google buying a company a week. Microsoft has adapted to the modern internet by buying Skype and LinkedIn. Amazon deals include Quidsi, the online retailer that owned Diapers.com, Soap.com, and other flagships; Amazon shut down these competitors in March.

Facebook best exemplifies the growth-by-merger model of Big Tech. The company uses an internal database to monitor mobile app rivals; ironically, the software tool came from the acquisition of a startup named Onavo. Once it identifies early growth in a competitor, it offers them a simple directive: Join or Die.

Instagram joined, for $1 billion. So did WhatsApp, for $22 billion. Most recently, Facebook acquired anonymous messaging app TBH, which was only live for two months before the new boss came calling. Snapchat rebuffed Facebook’s entreaties, so Facebook employed Plan B: they copied Snapchat’s innovation of short, disposable messages, through a feature called Stories that it copied onto four of its most popular products. Instagram VP of Product Kevin Weil explained, “This is the way the tech industry works,” and he’s not wrong. But in the hands of a platform monopoly, copying rivals can strangle them. Snapchat has struggled since Facebook declared war.

Facebook uses its market share or its wallet to bury competitors. Google has a similar strategy, transforming its search by providing answers instead of links. They’ve hobbled entire websites by scraping content and posting it as their own, thereby keeping users inside the Google ecosystem. That the platforms can carry this out with impunity saps the hope from any would-be startup. Seed funding in Silicon Valley has slowed down by 40 percent since 2015, because what’s the point?

Amazon similarly intimidates everyone in its path to world domination, including local governments, who’ve competed against each other to bribe the company into siting its new headquarters in their cities. NYU’s Galloway explains that consumer stocks now move for only three reasons: the performance of the company, the macroeconomic environment, and whether Amazon is moving into their sector. Amazon buys Whole Foods and supermarket stocks tank. Amazon files a trademark on a meal-delivery kit and every rival in that space nosedives. Amazon hints at selling prescription drugs and pharmacy CVS goes out and buys health insurer Aetna, an example of concentration creep, where monopolists in one industry beget monopolists in another.

A first step to counteracting this market failure would place a moratorium on all acquisitions for tech platforms that already have too much power. “If it’s clear that Facebook and Google can’t manage what they already control, why let those corporations own more?” asked Matt Stoller and Barry Lynn of the Open Markets Institute in a Guardian op-ed. A merger ban could prevent these companies from de facto dominance of next-wave technologies like virtual reality and artificial intelligence, if some enterprising entrepreneur solves the problem first.

But that only maintains an inadequate status quo. And observers are warming to the idea of more drastic action. “In my book, I walk up to the line of calling for the breakup of these companies and kind of balked,” says Franklin Foer. “I have come along in my own thinking even since publication.”

Google has helpfully split itself into business lines under the parent company Alphabet; you could just cleave these off, or force Alphabet to do so by establishing regulatory mandates promoting competition, like the EU did in the Google Shopping case. Similarly, Facebook has kept the Instagram and WhatsApp brands going; it wouldn’t be hard to disintegrate them, under a similar competition rationale.

Rather than policing neutrality, a difficult task for even aggressive regulators, you could force structural separation, forbidding Amazon to operate business against companies it allows to sell on its platform, or prohibiting Google to own both search and advertising, using data from one to profit on the other. The government is currently challenging a vertical deal between AT&T and Time Warner, fearing that ownership of content and distribution in the same hands creates anti-competitive opportunities. But Apple, Google, Facebook, and Amazon have just as widespread content and distribution tie-ups. “Vertical is so important in high-tech, because the challenger to today’s monopolies sits on top of them,” says Gary Reback. “Netscape couldn’t get to market without Microsoft. Shopping sites can’t get to market without Google.”

Skeptics of an antitrust approach to Big Tech use two main arguments. First, they worry about the length of cases. “It would be a multimillion-dollar venture that could take ten years,” says Hal Singer. “It’s like redirecting a cruise liner.” By the time you’ve reached a resolution, Singer adds, innovators who could benefit from it would all be out of business. He doesn’t oppose bringing a case, but sees it as an aspirational goal.

What this misses is Gary Reback’s famous construction that “the trial is the remedy.” Reback’s legal work led to the U.S. antitrust case against Microsoft bundling its computers with its web browser and software. “It was a high-profile trial covered by the press, which does a better job of explaining than lawyers do,” says Reback. “People loved tech, but then they saw what Microsoft was doing, they saw the emails.”

Even though the ultimate resolution was weakened by the Bush administration, public sentiment (and some additional European fines) led Microsoft to soften its aggressive strategy against rivals. “Microsoft ran Netscape out of business, so the only way to get to Google (at the time) was the Microsoft browser,” says Reback. “They could have killed Google in the cradle, but they didn’t, and the reason why, according to Microsoft people, was they had this public trial.” Microsoft’s later move into search with Bing happened too late. Franklin Foer calls the Microsoft case “one of the most important developments in American political economy over the last 20 years. It created space for the platforms.”

You could re-run the Microsoft case against Google now, over the bundling it does in Android phones or its bias in search. “Elements of the Google business model seem written into the DNA of the Microsoft settlement,” says Marshall Steinbaum. But this speaks to the second half of the skepticism on antitrust: Will a court rule favorably?

For the past 40 years, antitrust jurisprudence has followed the convictions of Robert Bork and the University of Chicago, which dictates that mergers are beneficial unless they harm consumer welfare. It also generally blesses vertical combination for its economic efficiency and benefits to consumers. Even since the Microsoft trial, this straitjacket has gotten tighter, with stricter evidentiary standards and endless interpretations among economists on what constitutes anti-competitive behavior. Bork himself wrote a Google-funded study arguing that effective search benefits consumers, who can switch to any competing search engine “at zero cost.”

This myopic and self-serving perversion of antitrust frustrates efforts to break up the tech giants. Regulators would need to show concrete harms to consumers from sites like Facebook and Google that are nominally free. Even questions of bias against rivals aren’t clear-cut. “Google doesn’t tell Yelp you can’t get to the customer, it just puts them on page 2 [of search],” says Hal Singer. And the impact of lost innovation from startups that choose not to compete because they know Facebook or Amazon will bury them is impossible to quantify.

Reformers respond to this by arguing that the consumer-welfare standard cannot encompass the harms presented by these firms. “There’s growing evidence that [the] consumer welfare [test] has failed on its own terms,” says Lina Khan, pointing to research showing that prices rise after mergers. “The tech sector shows that failure with particular elegance. Companies can monopolize the economy without breaking anti-monopoly laws.” She believes that set standards to promote competition and give rivals the right to access the market, sometimes called per se rules, would solve the platform problem better than the open-ended inquiries of today. “We should move away from consumer welfare to a broader appreciation of corporate power and simpler legal standards,” says Sandeep Vaheesan.

The Justice Department and the FTC could make these guideline shifts without going through Congress. They could refashion antitrust to better take into account the impact of tech monopolies on consumers, suppliers, workers, and the broader economy.

 

Competition Through Compulsory Licensing

A final alternative again takes history as its guide. In 1956, the Justice Department offered AT&T a deal: They could retain their monopoly over telephone communications, but they would have to give up their prodigious market advantage from Bell Labs. This subsidiary of the AT&T empire, born in 1925, conducted multi-faceted scientific research, developing such technological building blocks as the transistor, the microchip, the solar cell, the laser, and the cellular network. Practically no research facility in history has been as productive or as recognized: Eight Nobel Prize winners came out of Bell Labs.

Under the 1956 consent decree, all current and future Bell Labs patents had to be made available to any applicant who wanted them. Previous patents, 7,820 in all, would be licensed without royalties, while future patents could be had for a nominal fee. And something incredible happened, as four economists explained in a recent paper from Yale University.

Phillip Pessar/Creative Commons

New York University professor Scott Galloway explains that consumer stocks now move for only three reasons: the performance of the company, the macroeconomic environment, and whether Amazon is moving into their sector.

Not only did business participants benefit from existing patents; compulsory licensing actually permanently increased innovation in dozens of unrelated industries that built on Bell Labs’ work, mostly from young and small companies. The 1956 decree “remains one of the most unheralded contributions to economic development” in American history, wrote Peter Grindley and David Teece, “possibly far exceeding the Marshall plan in terms of wealth generation.” Even as Bell Labs’ research dropped off, the public still benefited in aggregate from the innovation the licensing unleashed, and the industry it fostered.

“This is what started Silicon Valley,” says Taplin, who wrote about the Bell Labs consent decree in Move Fast and Break Things. Indeed, companies like Intel, Hewlett-Packard, and Motorola can trace their beginnings back to that consent decree. A similar lawsuit against IBM for bundling its mainframe with software led to the computer giant passing off software to other companies, creating another giant industry. “The idea was that the companies could stay a monopoly, but have to stop using intellectual property as a cudgel against peers,” Taplin says.

If Google were put into a compulsory licensing regime, it would have to give up patents for its search algorithms, self-driving cars, mapping software, virtual reality, and Android operating system, to name a few. As the Bell Labs example shows, this type of antitrust enforcement enhances public welfare by benefiting both competition and innovation. And again, it’s not a novel idea: Under existing law, many patents are required to be licensed under “fair, reasonable, and non-discriminatory” (FRAND) terms.

Obviously, all the complications around applying antitrust in its hobbled modern context apply. In addition, the Yale study showed that innovation did not jump in the telecommunications industry after the licensing decree; AT&T had maintained its network effect, foreclosing competition. To really enjoy long-term technological change, you have to bust the industry giants that sit on innovation, says Gary Reback. “Setting up the industry so it once again runs on competition as opposed to oligopoly, that’s the key.”

 

Connecting the Dots

From this broad canvas, you can piece together the outlines of a strategy, with interlocking approaches designed to restore competition. You start with hearings and investigations to identify how platforms operate. Then you incorporate tools—data protection, neutrality standards, compulsory licensing, marginal taxes, antitrust cases—to combat the negative trends. A neutrality regime may lead platforms to shed businesses without a government-mandated breakup, or structural separation relieves the regulatory burden to police bias. Remove the value of ad targeting, and the problem might solve itself; give innovators free use of the tools, and competition could burst forth. “We need a suite of solutions, not just one,” says Vaheesan. “The current cacophony of ideas is not a bad thing.”

Luther Lowe’s idea of crowdsourcing investigations and leveraging Big Data could render moot the debate over the consumer-welfare standard. “If you look under the hood at the analytics of these companies, it puts a stake in the heart of Borkian economics,” Lowe says. “In The Antitrust Paradox, Bork has a line about how we’ll never have enough information to plot an actual demand curve. But we have more information now than we’ve ever had. We can overcome these objections.”

If you set up structural or regulatory barriers to prevent competition, you might even get the platforms to turn on each other. Right now, Big Tech operates almost like a cartel, each with its own fiefdom (Google paid Apple $3 billion in August to remain the default search on the iPhone, the way a competing Mafia organization would pay tribute for access to the street). The areas of overlap are rare, though new technologies like voice-enabled digital assistants bring it out (Amazon seems to have beaten Google and Apple to the punch). Losing monopolies in specific arenas could lead the platforms to search elsewhere to cleave market share. Starting turf wars among the giants might benefit consumers and weaken the giants so outsiders could enter markets and thrive.

Obviously none of this will be implemented tomorrow. Big Tech is still learning how to navigate Washington, but even while under siege they control massive resources to get their way. And while Donald Trump blusters about Big Tech on occasion, his policies have offered them tremendous benefits. The Republican tax plan’s lifeline for money earned overseas that can be repatriated at a skinny tax rate mostly benefits the tech industry, which has several hundred billion dollars stashed. Trump’s NAFTA rewrite proposal would limit Facebook and Google’s liability for content on its site, even as Congress tries to hold them accountable for Russian meddling. He just signed a defense policy bill that could turn over much of the federal government’s commercial procurement to Amazon.

But the aftermath of the financial crisis taught the lesson that those seeking reform need a shelf full of ideas when the opportunity to implement them arrives. And instead of technocrats dominating competition policy, the focus on recognized consumer brands with supreme importance has opened up the debate. “It’s healthy that there should be public input into a realm of policy that profoundly affects public welfare,” says Marshall Steinbaum. “The idea that we should do antitrust behind closed doors is what got us where we are today.”

Franklin Foer adds that the Democrats’ search for an economic identity after the Trump election also creates positive momentum for anti-monopoly solutions. “I’ve talked to [Senate Minority Leader Chuck] Schumer about antitrust,” Foer says. “I think he understands that there’s free-floating anger that the Democrats need to be able to capture and steer toward prudent solutions.”

Indeed, Democrats have put antitrust enforcement at the center of their “Better Deal” framework, putting them on record that their return to the majority will have to accompany a strategy to end the Big Tech monopoly. And the bipartisan concern over the platforms could leave them with fewer friends when the political moment strikes. Most of the tools to enforce already exist and just have to be correctly targeted. The laws are on the books. All that’s required is political will. “Antitrust is really driven by an appointee,” says Taplin. “You can have a president who says, ‘I’m going to get a hard-ass in there,’ and no laws have to be passed to change everything.”  

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