In How Each Big Tech Company May Be Targeted by Regulators, we learn (thanks to Jack Nicas, Karen Weise, and Mike Isaac) that attorneys general in eight states are starting an antitrust investigation of Facebook, which comes as little surprise, and could be completely valid from their perspective. The company has snapped up a long list of competitors to squash competition. A forced spinout of Instagram and Whatsapp could certainly increase competition in the social media sector.
However, the arguments leveled again Apple vis-a-vis the Apple Store, Amazon’s competition with companies selling on its ecommerce platform, and Google’s algorithms for search results ranking all fall into a different category: exploiting the power of platforms. That’s a thornier mess than the Facebook social media monopoly, actually, and one of considerably broader scope.
So, we have a riddle: how are Google search results like railroad shipping rates? The answer may be that they will soon have to be ‘fair’ in the same way.
Consider Google, as the authors did [emphasis mine]:
It has crowded its search results with its own products and services, such as Google Maps, Google Images and Google Flights. Google has gotten so good at answering users’ questions, more than half of Google searches now end on Google, without a click to another site, according to a recent analysis by Rand Fishkin, an online-search analyst.
Google’s new approach has given users quicker answers. But some competitors argue that Google is abusing its dominance in search and inducing internet users to not click beyond Google, which starves those competitors of customers for their products or users to see ads on their sites.
How Google presents its search results could be subject to antitrust laws because it has an effective monopoly, handling more than 90 percent of searches worldwide, according to some estimates. Because Google has become the primary way customers find businesses, steering users to its own products could be considered anticompetitive behavior under some laws.
The Federal Trade Commission investigated Google for such a practice. They settled, and the agency did not conclude there was harm to consumers. In 2017, the European Union fined Google $2.7 billion for favoring its shopping service over rivals in search results.
Ultimately, the question is whether internet search has to be treated as a public utility, and regulated the way that the US designated railroads as common carriers in the Interstate Commerce Act of 1887, with the goal of stopping anti-competitive behaviors, like charging coal companies extortionate rates for transport while competing with them directly. As described by Tyler Bettilyon in Network Neutrality: A History of Common Carrier Laws 1884–2018:
The purpose of common carrier law is to ensure that the business being paid to transport [goods/people/data] must do so in a way that is agnostic to the thing being transported. Because railroad companies are common carriers railway ticket sales cannot discriminate against people based on their race, gender, appearance, and/or sexuality. The railroad has to service anyone who wants to ride, and they cannot change their fares on a per passenger basis. Similarly, common carrier freight rail organizations cannot discriminate based on the type of good being shipped.
So, we have a riddle: how are Google search results like railroad shipping rates? The answer may be that they will soon have to be ‘fair’ in the same way. Google’s search results may soon have to exclude anti-competitive results, such as putting its own shopping service links first when someone is searching for a cocktail shaker.
At a foundational level, across platforms in general, will all successful platforms have to accord with the legal principles of common carriers? Will Apple have to open up the App Store, and stop gouging such high percentages on app sales, and favoring some apps over others in search results? Will Amazon be forced to use some concept of ‘fairness’ in search results when someone is searching for that cocktail shaker?
At a foundational level, across platforms in general, will all successful platforms have to accord with the legal principles of common carriers?
And if these players are deemed anticompetitive, what will be the general remedy? Creation of a one or more non-profit search engines that the platform owners will have to use? Continuing with platform-owned and managed search, but overseen by new regulatory agencies, or new groups within existing agencies?
Can the platforms make the argument that in one or more of these areas that they are ‘natural monopolies’, as was the case with AT&T? Again, from Bettilyon:
The 1934 communications act established that Bell/AT&T was a common carrier, and described the FCC’s rules for common carriers under Title II of the act. At the time AT&T was considered a “natural monopoly” — a service that works best when managed by a single organization rather than a competitive market. As such the act didn’t seek to end the monopoly, but instead sought to enforce similar non-discrimination rules to AT&T’s telephone service [as had been applied to railroads in the Interstate Commerce Act].
The premise is that, even if based on natural monopolies, these platforms will have to follow the pattern of common carriers:
to publish carriage rates in advance, not discriminate on the goods being transported, and not discriminate based on the person to whom they are providing service.
This will curtail a great deal of the freedoms — and profits — that platforms enjoy today. And, unsurprisingly, in 1934, the reaction to these regulations was similar to what we hear from the libertarian voices in Silicon Valley today, as Rebecca Ruiz observed in 2015:
Eight decades ago, when Congress passed the Communications Act of 1934 and created the F.C.C., Republican lawmakers objected just as loudly, and with similar concerns.
Two senators — Lester J. Dickinson, Republican of Iowa, and Thomas D. Schall, Republican of Minnesota — strongly opposed the 1934 legislation. They called President Franklin D. Roosevelt’s administration “desperate” and overreaching. The senators said the act was an attempt to “censor the press” by seeking to regulate telegraph companies and broaden the Radio Act of 1927, according to news coverage at the time from The New York Times.
In February 1934, President Roosevelt had asked Congress to create the F.C.C. to centralize authority over radio, telephone and telegraph services. On Feb. 26 of that year, The Times, on its front page, reported the recommendations made by the president and a committee he had created to study electronic communications:
“The committee’s study led it to believe that rates for the various services could be lowered through regulation of company profits, overhead expenses and intercompany charges.
The committee felt, further, that a single independent government agency could prevent discrimination, regulation of annual depreciation charges and extension of service to localities and homes not now served.”
By June, legislation along the lines of President Roosevelt’s vision passed both the House and Senate and was signed into law by the president on June 19. But leading up to that, The Times reported on strong Republican dissent.
I won’t get into the Net Neutrality story and how we have come to have such a lightly regulated internet — which has led to the situation we are in now — but I may revisit this theme in the weeks and months to come, as these looming court cases start to capture even more headlines, and can have an impact on the future of platform ecosystems.
What if ecosystems were constructed so that they were governed by the participants, rather by the hypercapitalist strivings of the platform owners — such as Apple, Google, Amazon, Facebook — or the heavy-handed regulators?
However, just one more question for today: what if ecosystems were constructed so that they were governed by the participants, rather by the hypercapitalist strivings of the platform owners — such as Apple, Google, Amazon, Facebook — or the heavy-handed regulators? Is there a middle ground where the needs of the end user and those building, marketing, and shipping products and services can be balanced, and a fair share of the profits are distributed not just through common carrier laws but by the shared economics of a commons, and where the platform orchestrator gets a fair share, as well? We may need to shift our thinking from common carrier to commons carrier, in the near future.
More to come.