What Would Breaking Up Big Tech Look Like?
Antitrust law is the big stick that an otherwise pro-corporate government uses to correct some particular forms of market failure. For instance, if a company is too big, and its size and control of the supply of a particular good or service undermines consumers, that company might be forced to pay some fines and change some of its practices; alternatively, it might be broken up into smaller companies. In the 1980s, the federal government “broke up” AT&T. The “Bell System” was broken up by consent decree in 1982, and AT&T was required to cede ownership of the Bell Operating Companies, providers of local telephone service. Significantly, the filing began eight long years earlier (in 1974) suggesting that the anti-trust process takes quite a long time.
Thus, any action initiated by the federal government in the present will likely be a years-long process to reach its resolution. A lawsuit by the Department of Justice (DOJ) against Google seems imminent and will be the biggest antitrust action since the last time big tech came under fire — back in the 1990s when the DOJ sued Microsoft. Calls for such an action have gotten louder over the past few years — and not just in Washington, D.C. The editorial board of the Pittsburgh Post Gazette weighed in on the issue around the time the DOJ’s case appeared on the horizon. The board declared that “these companies are monopolies like the big oil and railroad trusts busted up in the early 1900s. But their products matter more than oil and their methods are worse than the monopolies of old.”
Google is unlikely to be the only target when all is said and done. The allegations involve the use of massive size and power to “cripple” the competition, as in Amazon’s domination of e-commerce through the control of third party sellers who “rely on Amazon for their income, making those sellers increasingly more vulnerable to changes in Amazon’s rules.” Amazon also forces those sellers into arbitration if there are disputes.
An investigation into tech giant’s actions that resulted in a report from the House of Representatives concluded: “Each platform now serves as a gatekeeper over a key channel of distribution . . . By controlling access to markets, these giants can pick winners and losers throughout our economy.” That gatekeeping function would be different if performed by an entity that was not also a competitor in the marketplace. The report states: “These firms typically run the marketplace while also competing in it — a position that enables them to write one set of rules for others, while they play by another, or to engage in a form of their own private quasi regulation that is unaccountable to anyone but themselves.”
The question, though, isn’t whether these companies have a hugely disproportionate amount of power; it’s actually whether consumers are harmed. After all, the products and services of Twitter and Facebook are free. In the case of Amazon, products are deeply discounted, and none of that spells harm to consumer welfare. Rather, breaking up these companies is likely to cost consumers billions while also harming research and development — which may likely be free or close to free — that might help consumers even more in the future. Big Tech has made it more and more difficult for any competitor to catch up, vs. traditional data industries such as appending, where big actors battle it out with scrappy small businesses like our marketing client Accurate Append.
A question that requires even deeper consideration is: if consumers are harmed, and if we value market competition as a means of ensuring freedom for both producers and consumers, what would a solution to this problem look like? Proponents of antitrust regulation believe that the best way to regulate big companies is to “reinvent a US antitrust model still based on the concept of consumer harm” that will effectively break up the big companies into many smaller ones. Proponents point out that for over twenty years, the largest four companies have purchased more than 500 additional companies total.
Opponents disagree with this solution. They see antitrust regulation as a 19th and 20th century solution to a 21st century phenomenon. Moreover, it’s not even clear that antitrust regulation worked last century. As Zachary Karabell points out, the federal government broke up AT&T in the 1980s and nothing much changed structurally after a time. There were more companies and more competition for a while, but currently telecom is dominated by AT&T and a tiny handful of other companies. “That breakup also made the wealthy Rockefeller family even wealthier,” Karabell says. That gives one pause: what or who is being served here? “In a new economy,” writes Allison Schrager of the Manhattan Institute, “we need new forms of regulation — and we should proceed with caution.”
In a supreme irony, Bell Atlantic, one of the original “baby bells” that AT&T had to cede in 1982, later merged with GTE in the year 2000 only to be acquired by Verizon — now one of the biggest phone companies and subject to the sort of complaints one would anticipate in antitrust discourse. This indicates that, whatever one might otherwise assert about market failures, it may be the natural trajectory of successful telecommunication and internet companies to grow big. Again, the threshold question is consumer harm, and in that respect, Big Phone is probably more harmful to consumers than Big Tech.
Perhaps a softer approach would be better? The San Francisco Chronicle’s Jeff Berkovisi suggests that nondiscrimination law may be a better approach than antitrust: Berkovisi says that it’s been used to regulate the cable industry, and that Amazon backed down from promoting its own products in ways that eclipse outside sellers, suggesting that there are more than one ways to answer monopolies. He writes that “breaking up big tech companies is the nuclear option” and that using nuclear weapons assumes you’ve run out of other options.
Obviously the Department of Justice has other options, and there’s a good chance that these opening litigation steps could be designed to play for a settlement. It’s hard to predict how actions like this will develop. And these are politically tricky times, with a potential new Department of Justice being staffed in 2021, the current Attorney General under fire and facing possible legal complications, and tech companies themselves being implicated as king-makers or breakers in Election 2020.
