Breaking Big Tech

In March, Elizabeth Warren rolled out an aggressive initiative to break up Big Tech. “Today’s big tech companies have too much power,” she wrote, “too much power over our economy, our society, and our democracy.” What have they done with this power? They have “bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

Her first claim is that they’ve “bulldozed competition.” What does this mean? Terms like “bulldozed” are tricky (as are “steamrolled” or “crushed” or similar terms when used in reference to competition), in that they could be describing behavior that is vigorous but ultimately morally permissible, or behavior that is definitely not okay. Netflix has been steamrolling competition, but that in and of itself doesn’t mean they’ve done something wrong. (Former execs for Blockbuster Video are furious with me right now.)

It’s safe to say Warren has the stronger meaning in mind. She’s saying these tech giants have ensured their dominance by eliminating competition in morally unacceptable ways. She highlights two in particular: mergers and proprietary marketplaces. It’s worth spending some time unpacking this, as it’s central to her big-tech-busting argument.

Warren vs. Big Tech
Examples of the mergers she’s talking about include Amazon swallowing up Whole Foods and Zappos, Facebook snapping up Instagram and WhatsApp, and Google absorbing Waze and Nest. These are the mergers she’d undo (among others) if her vision were implemented. What’s her problem with these mergers? They lead to “negative long-term effects on competition and innovation.”

The idea is that corporate giants such as Amazon, Facebook, and Google harm society through their aggressive pursuit of rival companies, usually startups — not to compete with them, but to buy them out. When massive firms are allowed to behave this way, it creates industry incentives that are inimical to user interests. How so? Startups and smaller companies are encouraged to develop products and services that the giants don’t themselves do, which ensures that the giants never really face a frontal attack.

So instead of a marketplace enabling Amazon, Facebook, and Google competitors to sprout up, we have a landscape in which startups are incentivized to develop products that these megacompanies will want to buy to diversify their offerings and further solidify their dominance. Google wouldn’t have bought a rival’s attempt at a Google alternative, so the rival didn’t even try. But Google was interested in Nest, which is something they weren’t already doing, so that’s what the startup focused on. You can see how, with no Facebook killer on the horizon, Facebook is under very little pressure to innovate.

When Facebook CEO Mark Zuckerberg appeared before the Senate’s Commerce and Judiciary Committees in April, Senator Lindsey Graham (R., S.C.) pressed him on this very point.

The fact that Zuckerberg cannot straightforwardly name a single competitor is precisely the point Graham was getting at. As Graham suggested, Ford would have no problem citing Chevy or any number of other competitors, if asked.

There are a number of ways to address this. One, favored by Warren’s fellow senator and presidential aspirant, Amy Klobuchar (D., Minn.), is to block any company with a market capitalization over $100 billion from making acquisitions. Klobuchar’s bill could result in big-firm break-ups, but indirectly, creating a strong financial incentive to stay below the threshold in order to retain acquisitional power. Big companies would be inclined to break up with themselves, as it were. But Warren wants to ensure their deconsolidation at the front end, using the executive and legislative branches to secure the outcome.

Warren’s proposal involves beefing up the antitrust regulatory machinery at two levels, appointing regulators to reverse mergers and passing legislation that changes the structural conditions for companies whose products are designated “platforms.” Kamala Harris (D., Calif.) has also registered a worry on this latter point, suggesting that these platforms function like utilities. Harris’s emphasis has been on their unregulated nature, which is problematic for platforms that people by and large require access to in order to operate in our modern economy. Warren, for her part, worries about the companies’ leveraging their platforms, i.e., their proprietary marketplaces, into a competitive edge elsewhere.

Historically, the more fraught type of monopolistic activity was thought to be the vertical kind, which means controlling every level of the productive process — sourcing, production, distribution, sales. The buying up of rival companies, instead, might amount to horizontal monopolization, which in earlier days was less feared. Warren has evoked both forms in her critiques of mergers (horizontal) and proprietary marketplaces (vertical-like in their control of the structural components of an industry).

Facebook
Let’s say a bit more about Facebook, which is back in the news after one of its founders, Chris Hughes, scheduled a major media blitz calling for the splitting up of his former company. (Hughes knows a thing or two about destroying companies — a few years back, he bought The New Republic only to singlehandedly drive it into the ground.) Since we’re in a presidential primary season, news items can receive signal boosts simply by having candidates seize on them or speak out about them.

So Cory Booker (D., N.J.) has “expressed caution” about the push to break up Big Tech. This is a precarious stance to take in the 2020 Democratic primaries. Why was he asked about it in the first place? Again, Warren had taken a stand on it, Hughes just recently stuck the dagger in Zuckerberg’s rear-facing circuitry (only humans have backs) — not to mention that Facebook averages something like a massive scandal a month. Unlike Warren, Booker prefers to let “antitrust legislation to do the proper investigations and to hold industries accountable for corporate consolidation.”

That’s a convoluted way of saying he wants to preserve the regulatory status quo but enforce it more. Here’s why this is interesting. Warren begins her call for breaking up the tech giants with a story of how Microsoft was tamed in the early days of the Internet age. She writes:

Sure, but then . . . why pursue things differently today? The tale of Microsoft’s taming is precisely the approach Booker is suggesting. It involved applying the existing regulatory framework to beat back Microsoft’s aggressive actions. If Warren is conceding it worked then, what’s changed?

In fact, later in her piece, Warren says: “Weak antitrust enforcement has led to a dramatic reduction in competition and innovation in the tech sector.” Okay, so, for Warren, a major problem is “weak antitrust enforcement.” Presumably, though, in a Warren administration the antitrust laws already on the books would no longer be overlooked — one would expect her to actively pursue enforcement. If the existing laws can get her Microsoft-like results, what’s her reason for wanting to dramatically augment the regulatory structure?

She doesn’t outright say this, but it’s safe to say that what she’s looking for is a more durable solution — one that isn’t vulnerable to the indifference of incompetent presidents, or even ideologically opposed presidents. The executive branch enjoys a remarkable level of discretion. Given finite resources — funding, manpower, etc. — an administration has significant power over which federal laws receive attention, and to what extent. But that potentially leaves matters of great importance in the hands of leaders who don’t always have their priorities straight — again, whether through incompetence or studied indifference. If an administration simply does not care to direct the Department of Justice to regulate this space, or if the commissioners at the Federal Trade Commission disagree that regulation is needed, it just won’t get done.

With her proposed legislation in place, the tech companies would have no choice but to comply. Without her changes in place, it’s always a toss-up at best — maybe the regulators will care; maybe they won’t. Warren would like mergers like those between Amazon and Whole Foods, Facebook and Instagram, and Google and Waze to be definitively ruled out, whether she’s in office or not.

Editors’ note: This article originally appeared in Arc Digital.

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