Don Quixote tilting at windmills

Calls to breakup Apple, Facebook, and Google are a modern day fairy tale

Carl Szabo
Oct 22 · 5 min read

Captain Ahab, Don Quixote, and Ponce de Leon — there are dozens of tales featuring self-proclaimed heroes chasing white whales, tilting at windmills, or hunting for fountains of youth.

Today we have real life examples of mythical pursuit embodied in the rhetoric of those who claim that technology innovators like Apple, Facebook, and Google are monopolies as the basis for their breakup.

Their claims of technology monopolies are classic stories recycled for modern day audience, yet undermined by reality and history. Unfortunately for them, however, we have seen and re-seen their movies, and the endings never bode well for their cause.

Look no further than criticisms waged against Yahoo and MySpace in their early stages.

A Forbes headline in 1998 was How Yahoo! Won the Search Wars, saying, Yahoo!’s “near-flawless execution and brilliant marketing have eviscerated the competition.”

And before Facebook, MySpace was considered the presumptive social media gorilla never to be toppled.

Time and again these critics are proven wrong as robust competition perpetually disrupts the presumptive market dominator.

But like the pursuits of Captain Ahab, many of those calling for the breakup of technology innovators ignore reality and common sense — often-times hand waving away facts that counter their preconceived monopolistic declarations.

We saw such examples of fact-devoid statements on display at the Democratic debate and recent hearing before the US House Judiciary committee where self-proclaimed prosecutors of tech innovation laid out their cases to “break up” these companies.

But their repeated failure to answer the most basic threshold questions eviscerates their arguments.

What is the relevant market?

This means identifying who should be considered a competitor. Consider the market of “soda.” Should we include only Coke and Pepsi? Or include Dr Pepper? What about sports drinks that compete with soda?

Does the defendant have “market power?”

This usually requires proving that the defendant controls so much of the market (ideally over 80%) it can raise prices above the market rate without losing sales. In a town with only one store, if that store can sell milk above its market rate, then there is market power.

Is the defendant abusing their market power over this specific market?

This is usually shown through efforts of preventing new market entrants or driving competitors out of the market.

Finally, after answering all of the above, prosecutors must answer, has there been consumer harm?

Looking at Apple, Facebook, and Google under this rubric for more than a minute, it becomes clear that anti-technology advocates are channeling their inner Don Quixote and tilting of the antitrust windmills.

Let’s look at Facebook.

Let’s start by going really broad with our definition — a major component of social media is the ability to connect people over the Internet. Well now our market includes email providers, voice over IP, chat services, video conferencing. Here Facebook is clearly not dominant.

Let’s make the market only services like Facebook that include profiles and allow people to “follow” and similar actions. Well again, Snapchat, Twitter, Nextdoor, TikTok, YouTube, LinkedIn, Dischord, Twitch, and many more.

Clearly Facebook is not a monopoly here.

Turning to Apple.

But let’s give our tech prosecutors a shot at proving their case and define the market at just apps on iPhones. Since app developers are the ones who set the prices for their apps and not Apple, it’s impossible to see how Apple is has any market power in setting the prices of apps on the iPhone.

Moreover, there is clearly no consumer harm as the price of apps and services have continued to fall precipitously over the decade life-span of the iphone.

Clearly there is no antitrust case against Apple.

Lastly looking at Google.

If a consumer is looking for a place to eat tonight, a search on Yelp helps guide the way. Or if that same consumer is looking to buy a car, TrueCar.com is there to help. When it comes to looking for something to buy, nearly 50% of all product searches start on Amazon.

So we have to ask what is the market for search? Is it all search, including more specific searches, or just general searches?

Even if we ignore how people use the Internet and define the market as just general search — where Google has 75% of general search worldwide — we must identify if Google has market power. But with online search there is no barrier to using a competitor.

So even if Google has a large share, they lack market power — in essence competition is just a click away.

Again, the prosecution fails to make its case against Google.

New Argument — Advertising

Even assuming we ignore the much larger market for television, radio, and print advertising, and just look at online advertising, Google has only 32% share of U.S. ad revenue while Facebook has only 20%.

With Amazon becoming a fast growing new entrant, it is clear that neither Google nor Facebook has market-power even in this narrowly defined market.

Now it’s understandable why these anti-technology advocates want to talk about breaking-up technology innovators. It makes them look like the hero coming to slay the dragon.

No Dragons, No Fountain of Youth, No White Whale

NetChoice

The home on Medium for all things NetChoice. Here, we publish opinion pieces on issues that we cover — fighting to break down barriers to e-commerce.

Carl Szabo

Written by

Tech and Privacy Attorney specializing in federal, state, and international legislation and tech issues.

NetChoice

NetChoice

The home on Medium for all things NetChoice. Here, we publish opinion pieces on issues that we cover — fighting to break down barriers to e-commerce.

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