TECH TITANS AREN’T ROBBER BARONS
As I watched the House Judiciary Committee’s Antitrust Subcommittee summon and subsequently grill the CEO’s of Apple, Alphabet, Amazon, and Facebook this past July regarding allegations of anticompetitive business practices, I couldn’t help but scratch my head at the suggestion that they have somehow become today’s “Robber Barons”. To be sure, Americans (and the Congress that is elected to serve them) have a right to be wary of developments that impact our competitive environment, especially when those developments are super charged by rapidly growing enterprises worth trillions of dollars.
Therefore, a legitimate and serious study as to whether anti-competitive business practices are being exercised and, as importantly, whether anti-trust rules and laws need to be updated, is certainly worth examining. However, the trajectory of the hearing quickly became lost on me as it apparently focused less on what we could learn from these smart executives and much more on painting Tim Cook, Sundar Pichai, Jeff Bezos, and Mark Zuckerberg as the great “Robber Barons” of the 21st-century — a comparison I found to be shockingly hyperbolic and sloppily inexact.
While Cook, Pichai, Bezos, and Zuckerberg are exceptional businesspeople who have done well as the founders and CEOs of technology-based companies (the first two as CEO’s, the second two as Founders), I never thought of them as “Robber Barons”. In fact, it didn’t ever dawn on me.
The term, “Robber Baron,” derives from the term Raubritter, or “robber knights”, used to describe German land-owners in the medieval period who would impose illegal taxes on travelers moving through their lands. The term was introduced in American media in the late 1800’s to create an analogy of the German lords of old to the industrial giants of the late-19th and early-20th centuries, such as the Vanderbilts and Rockefellers. Practices by these tycoons included price-fixing and control over the supply — and subsequently, demand — of products such as railroads and oil, which prevented competitors from spawning in their respective markets and earning massive profits along the way. This inevitably turned these enterprises into monopolies in dire need of regulation, forcing the creation of America’s first antitrust law, The Sherman Act, in 1890.
The Sherman Act, and the two antitrust laws which subsequently followed in 1914 — the Clayton Act and the Federal Trade Commission Act — were put in place to break up these perplexingly large enterprises which came about in this country as a result of the great Industrial Revolution. These three pieces of legislation ultimately prevented control of product supply (and therefore pricing), allowing for new business ventures to compete effectively in markets once wholly controlled by companies which exhibited monopolistic behavior.
Monopolistic behavior described then and still does today a market in which only one company or entity offers its product(s) or service(s) to the public, whether or not it does so with the intent of keeping potential competitors at bay. It is the antithesis of what is known as a perfectly competitive market, which exists in theory, though not in reality.
In light of that, is it therefore appropriate or even fair to label firms such as Apple, Google, Amazon, or Facebook as exhibiting monopolistic behavior?
Apple’s iTunes platform sees healthy competition day-in and day-out from Spotify, Pandora, Sirius XM, and Amazon Music. Google, currently in a yearlong legal battle with antitrust regulators, is accused of using its marketplace dominance to stifle competition; however, hundreds of other online search engines exist and offer the same services as Google at exactly the same price to consumers — i.e. free. Amazon, reportedly criticized as an unstoppable behemoth in the retail market, owns roughly 1% of the global retail market and less than 5% of the retail market in the United States. And, like the department stores of yesteryear, it has to compete against very successful online retailers such as specialty eCommerce store Etsy and brick and mortar department stores like Walmart, which just launched its online answer to Amazon’s Prime, and Target, which just logged its best quarter in a decade. Facebook itself, spawned from the growing social media market of the early 2000’s where it beat out MySpace as the world’s most-visited online social media website, loses users every day to other social media platforms like TikTok, Twitter, LinkedIn, and a host of new entrants slicing market share day in and day out.
In short, these technology companies are indeed huge . . . and profitable; however, they are also in a daily fight for their lives.
Antitrust laws were written to protect Americans against unlimited control and unlimited pricing of industrial and consumer products. Today’s concerns about emerging technology are less focused on price-fixing, but more on “idea-fixing”.
Since their inception, Google’s search engine and Facebook’s social media platform are free to all users. Amazon is able to perpetually provide consumers with a broader array of goods at consistently lower prices, a position it acquired after losing over $50 billion in shareholder equity over twenty years.
To some extent, it could even be argued that today’s giants of industry are not under scrutiny so much for their financial practices — which are tenuous at best — but for social ones. Amazon has come under fire in recent months for its treatment of warehouse workers during the COVID-19 pandemic, while CEO Jeff Bezos added billions to his wealth. In April of 2018, Facebook CEO Mark Zuckerberg was summoned to testify in Congress regarding his company’s collection and handling of user information; watching the testimony left me feeling more like I had just watched someone from Geek Squad offer politicians a crash-course on “Internet 101: Do’s and Don’ts”.
Companies like Apple, Google, Amazon, and Facebook — each a corporate giant in its own right — are not monopolies as the oil or railroad Robber Barons ran in the late 1800’s and early 1900’s. These companies were founded not on (and continue to grow upon) a specific consumer or industrial product, but instead on a consumer platform, the technology for which becomes cheaper and cheaper to replicate each year. Nothing appears monopolistic about building and gaining user traction with a platform, or benefitting from standard “network effects” as did eBay and countless other auction sites. When the Netscape internet browser was released in the late 1990’s, for example, Bill Gates saw it as an existential wake-up call which could have made Microsoft’s software products archeological relics. He bounced back instead and launched a browser of his own — only to again be challenged — this time by Google’s browser.
Elon Musk, founder of SpaceX, launched a private company founded on the innovation of building reusable rockets that will lower the price of space exploration and blanket the globe with satellites connecting the world to the Internet. All the while, Jeff Bezos is nipping at his heels with Jeff’s Blue Origin. We no longer exist in a world where standard and antiquated antitrust laws can be blanketly applied to new technologies. Today’s billionaires are able to compete in any space they wish to occupy for as long as they want to, or at least until they are bested by the competition, which is barreling towards them. The technology conglomerates of today are nothing like the Robber Barons of a hundred years ago; the ground they’ve won can be snatched from them in a disruptive blink of an eye. It’s a dog-eat-dog world among Tech Titans — at least so it appears — and consumers seem to be the biggest winners.
Moreover, consumers also have far more power today than they did a century ago, largely and perhaps ironically due to these same platforms. Have a negative experience with an Amazon product? Leave a review and use their platform to gain an exchange or refund. Did you find and report a hate speech-fueled post on Facebook only to have them not take it seriously? You can share the post to your network and even take it to other platforms (e.g., Twitter) to put pressure on Facebook to take action or fact-check.
So, with all that said, is a conversation appropriate to discuss the relevance of iconoclastic antitrust theory to current technology and its titans? And is it time to evaluate whether existing anti-trust and regulatory schema should morph or molt in today’s environment? Probably on both questions. But let’s start with a discussion identifying who, if anyone, is actually being harmed by modern technologies, and what, if anything, would be effective to address the issue.
And with that overview, from a fresh perspective, let’s recognize that in today’s environment, the rules have changed and the highway has been repaved by the very Tech Titans themselves.
