Breaking Up Big Tech
Are tech companies growing "too big to fail"?
In 2018, 5 tech companies, known as FAAMG, earned revenues equaling 68% of US GDP growth: Facebook: $55.0 billion Amazon revenue: $232.9 billion Apple revenue: $265.6 billion Microsoft revenue: $110.4 billion Google revenue: $136.8 billion
2019: Calls For Change Google, YouTube, and Facebook are 3 most visited websites worldwide 一 Giving just 2 companies enormous influence In March, Elizabeth Warren released a campaign ad calling for the break up of big tech companies — Facebook removed the ad, sparking bipartisan backlash "Curious why I think FB has too much power? Let's start with their ability to shut down a debate over whether FB has too much power" ー Elizabeth Warren "Big Tech has way too much power to silence Free Speech. They shouldn't be censoring Warren, or anybody else. A serious threat to our democracy" ー Ted Cruz Facebook-owned sites controlled a huge segment of social media & messaging Global Traffic Share Facebook: 61% ↓ 8% ↑ Instagram: 26% ↓ 25% ↑ WhatsApp: 16% ↓ 12% ↑ Messenger: 3% ↓ 5% ↑ In June, Tulsi Gabbard's campaign ads were pulled from Google after "large spending changes" triggered an automated fraud alertGabbard is now suing Google, alleging her free speech was violated In October, search results on YouTube reportedly removed Gabbard's channel and videos ー BUT only for searches originating in the U.S.Both incidents coincided with Democratic Presidential DebatesNearly all Americans conduct searches using Google-owned platforms Google Search: 88% YouTube: 73%
"There's been a profound change in the tech economy, and I think one that's very dangerous for the United States' economy" ーTim Wu, Law Professor at Columbia University & Author of The Curse of Bigness: Antitrust in the New Gilded Age
How Did We Get Here? Big Tech & Antitrust Developing Antitrust Regulations 1890, Sherman Antitrust Act Outlawed monopolies and cartels to promote economic competition Prompted by consumer outcry against exorbitant prices and competitor upset by being unfairly shut out of production 1914, Clayton Antitrust Act Amended prior legislation to add clear definitions and regulations Prohibited anti-competitive mergers and predatory pricing Allowed injured party to bring a private, antitrust lawsuit Placed the Federal Trade Commission (FTC) and the Department of Justice (DOJ) in charge of enforcement Microsoft's Antitrust Case 1998, Antitrust Charges When Microsoft began offering a free browser with its expanding software bundle, its chief competitor Netscape soon collapsed Led the DOJ to file charges alleging monopolistic acts 2000, DOJ's Ruling Ordered Microsoft to be split into two companies Windows operating system Office software suite The ruling was softened on appeal — BUT, through years of deliberations, Microsoft had lost ground to new competitors While some believe the case against Microsoft was decided by the free market, others think the government's case paved the way for new companies like Google and Facebook Big Tech Today Antitrust laws empower regulators to stop mergers that reduce competition Yet, big tech companies face little push back on acquisitions Amazon owns Whole Foods and Zappos Facebook owns WhatsApp and Instagram Google* owns Waze, Nest, DoubleClick, YouTube, and more BUT some companies aren't getting their money's worth: In January of 2019, SoftBank invested in WeWork at a $47 billion valuation — but by September, investor skepticism led to a potential valuation of as low as $10 billion, prompting a further $1.5 billion "bailout" investment According to the Department of Justice, a market share of at least 50% is needed before courts can declare a monopoly Big Tech falls just short of this benchmark FAAMG and Netflix captured 43% of global internet traffic Apple sells nearly half of all mobile tech in the U.S., including 41% of smartphones 46% of smartwatches Amazon captures 49% of U.S. e-commerce sales BUT far more than half of Americans use these platforms 2 in 3 Americans have purchased something on Amazon 7 in 10 of Americans have a Facebook account 9 in 10 Americans use Google Search
"[R]ight now Big Tech is as much a part of the problem as it is a part of the solution." ー Kenneth Rogoff, Professor of Economics & Public Policy at Harvard University
Proposed Solutions: The Future Of Antitrust Platform Utilities A new legal classification for big tech companies ㄧ regulated by breaking up the largest platforms and enforcing standards of fairness and nondiscrimination Giants like Amazon would be broken into separate companies Amazon Marketplace Amazon Basics Amazon Web Services Google Search would have to treat all results equally Google Reviews would have the same weight in search results bearing as reviews from Yelp and other review sites Google's Ad Exchange would become a separate company and no longer have an impact on search results Reversing Mergers Expanding the power of regulators to break up existing mergers, in addition to stopping new ones ㄧ making big tech more responsible to consumers' concerns Facebook, WhatsApp, and Instagram would be split apart Users could continue to connect to these platforms BUT, Facebook would face more pressure to improve with competition from other platforms Consumers could still shop Amazon and get fast delivery BUT, small sellers could use the platform without fear of predatory pricing from Amazon-owned brands The Free Market Rather than breaking up big tech, free market advocates suggest regulations to stop practices that harm consumers and limit competition Data & Privacy: Regulations like could demand transparency from internet companies regarding their data practices Free Speech: Regulators could develop guidelines for balancing free speech rights with the need to stop fraud and misinformation Predatory Practices: Antitrust laws could be expanded to ban practices like hiding competitors content in search results Net Neutrality: Would prevent internet providers from blocking, metering, or prioritizing certain websites or content 一 Big Tech needs the sames rules 2 in 3 Americans —regardless of political party— support the break up of Big Tech
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Carrie Morris
Author
Warren Dahl
Editor-in-Chief