Do We Need to Break Up Monopolies in Tech?

It’s safe to say that 2018 was rife with controversy for some US tech giants.

And it’s also safe to say that if a small business encountered any of the same contentious situations that some tech monopolies experienced last year, they’d almost certainly find their doors closed for good.

But for the reigning tech monopolies like Google, Amazon, and Facebook, the scales are tipped disproportionately in their favor. Most of us don’t think twice before using one of those platforms, not even when scandals pop up that signal significant (and unsettling) security breaches.

Just look at Facebook’s tumultuous last year, which saw an overload of controversy following the Cambridge Analytica scandal. And while there were numerous reports that users were leaving Facebook in droves, its monthly active users actually grew by almost 10% in the past year.

Or take the security bug that exposed the personal information of 500,000 Google+ users. After learning about the data breach, the company reportedly opted to not disclose the problem out of concerns that doing so would draw “regulatory scrutiny and cause reputational damage.” Despite that, the company saw a banner fourth quarter in 2018, with $39.12 billion in revenue, up from $33.6 billion the previous quarter.

The incidents aren’t ones to take lightly. But with these tech enterprises, once the scandal is no longer making front-page headlines, we seem to turn a blind eye and carry on using our Prime memberships, posting Facebook stories, and Googling to our heart’s content.

However, recent announcements have reignited important conversations about monopolies and how much dominance is too much for big tech.

Hindering Innovation and Competition

One such announcement came from Democratic presidential candidate Sen. Elizabeth Warren, who made headlines after she released a plan to disband Amazon, Facebook, and Google.

Warren’s proposal outlines imposing new legislation that would make big tech firms “platform utilities” and prohibit them from owning participants on their platforms. The plan also calls for dismantling some of the biggest merger and acquisition deals in the tech realm in recent years — Amazon would have to give up Whole Foods, Facebook would break from WhatsApp and Instagram, and Google would part ways with Waze and Nest.

“Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and titled the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation,” Warren wrote in a Medium post.

While the proposal’s been labeled as “far-reaching” and “aggressive” by some media outlets, it does put a spotlight on the issue of how monopolies hinder innovation and gobble up new companies before they can be a threat. In an interview last year with “60 Minutes,” Jeremy Stoppelman, co-founder of Yelp, said the platform “would have no shot” if it were built today.

“If you provide great content in one of these categories that is lucrative to Google, and seen as potentially threatening, they will snuff you out.”

The Case Against Microsoft

In her proposal, Warren reflects on a situation of the 1990s, when Microsoft, as the reigning tech giant, was attempting to shift its power in computers into dominance over web browsing. The federal government sued Microsoft for violating anti-monopoly laws and won.

While many were against challenging Microsoft, arguing that enforcing the antitrust laws would damage innovation and impede the growth of the tech sector, those fears turned out to be wrong. Thanks to the newly opened markets, innovation surged. In the end, the government’s antitrust case against Microsoft helped make room for other companies, including Google and Facebook.

Whether or not you agree with Warren’s proposal to disband tech giants, she makes a solid point stating that the Microsoft case “demonstrates why promoting competition is so important: it allows new, groundbreaking companies to grow and thrive — which pushes everyone in the marketplace to offer better products and services.”

The unfortunate flip side is that while many of today’s tech giants established their roots thanks to a competitive market that encouraged innovation, those same companies have since forgotten their origins. Rather than help nurture other startups going down the path they once took, these same tech giants have instead chosen to focus on exerting their dominance and squashing future competition.

The reason is simple: the status quo works for monopolies. It’s the emerging competitors that are shaking things up and bringing innovative technologies and practices to the marketplace. And the changes they bring are making processes more affordable, safer, and convenient. Just look at fintech, where the use of blockchain has already begun to disrupt the way companies and individuals process international financial transactions.

Big Tech and Big Banks’ Stronghold

Warren’s proposal isn’t the only one of late that has contested the growing power of US tech giants.

Rupert Murdoch’s Australian media company — News Corp Australia — recently called for the breakup of Google due to the massive influence that the tech company has over news outlets and retailers. News Corp Australia has called explicitly for separating Google Search from the rest of Google’s business.

In a submission to the Australian Competition and Consumer Commission, the media company acknowledged that breaking up Google is a “very serious step,” but stated that “divestment is necessary in the case of Google, due to the unparalleled power that it currently exerts over news publishers and advertisers alike.”

According to the media company, “Google’s comprehensive portfolio of ad tech services generates an ecosystem rife with significant conflicts of interest and lack of transparency.”

The overwhelming influence that the tech monopoly has over publications and advertisers is not entirely dissimilar to the position that banks take with ruling over their own territories.

Take for example the American big banks. The public has been told time and time again that the well-being of our economy inherently depends on big banks without much information to backup that claim. In fact, the current US megabank system, which is overseen by no less than a dozen federal and 50 separate state regulatory agencies, has made use of a continuous ‘pile-on’ fee structure and had a significant role in the financial crash of 2008.

Throughout all of this, customers have unfairly been left in the dark. Only monopolies like the American big banks and big tech can get away with such blatant disregard for transparency.

Big banks have become a monopoly that’s familiar and entrenched in our society, and as a result, we’ve essentially just accepted what they’ve told us. And it’s that sense of being so ingrained in our day-to-day lives that has made the big banks seem untouchable.

But a wave of change is happening, and fintech companies like Veem are proving that the future of the financial sector is taking place outside of the traditional banking landscape.

Monopolies exist in every industry, and there is little doubt that they’re going to be around for the foreseeable future. Where fintech is concerned, companies that are part of this industry may serve different purposes but have one common goal: to push the envelope with innovation. This common goal is why it’s essential for fintech companies to work together to overcome the influence that the US big banks have and show customers what else is available.

Regardless of whether disbanding Google or any other tech giant is practical or feasible, the notion at least provides an opportunity to have a meaningful discussion about the effects of monopolies on innovation and competition. As Martin Schmalz points out in the Harvard Business Review, healthy competition is “the backbone of the US economy and society.”

At Veem, we’re proud to be part of the push to spur innovation and competition. And we’re proud to support the many other small businesses that aren’t letting the dominance of monopolies sway them from pursuing their dreams.

Here’s to continuing to innovate for a better tomorrow.