The Government Needs to Break Up Tech Monopolies

In March 2019 Spotify published a video dragging on Apple for underhanded monopolizing. When a Spotify user upgraded to a premium subscription in the Apple store, Spotify had to pay Apple 30% of the fee.

Spotify sought to skirt the policy by not using Apple’s payment system, but Apple would not let users pay any other way. Apple won’t allow Siri to play music through Spotify on its devices either.

Apple owns the app store, and Apple Music directly competes with Spotify. Spotify had no recourse but to complain to its customers on Youtube.

Apple has been accused of abusing its monopoly-like power, as have all its tech peers on top of the market. While the Trump administration is unlikely to do anything about it, Senator Elizabeth Warren has called for breaking up the tech monopolies, trust-busting style, in her presidential campaign.

Warren calls for busting up tech trusts

It’s time to break up Amazon, Google, and Facebook, Elizabeth Warren says in a policy proposal on Medium. Apple, too.

She says the tech giants have too much economic and cultural power, and have “bulldozed competition … and in the process, they have hurt small businesses and stifled innovation.”

Half of e-commerce is through Amazon, while over 70% of internet traffic goes through sites owned or operated by Google or Facebook.

Tech giants have two primary strategies for maintaining their primacy ― crushing the competition, or gobbling it up.

Facebook has acquired potential competitors such as WhatsApp and Instagram. Google absorbed Waze and DoubleClick.

“Many big tech companies own a marketplace — where buyers and sellers transact — while also participating on the marketplace. This can create a conflict of interest that undermines competition. Amazon crushes small companies by copying the goods they sell on the Amazon Marketplace and then selling its own branded version. Google allegedly snuffed out a competing small search engine by demoting its content on its search algorithm, and it has favored its own restaurant ratings over those of Yelp.”

Round one financing for startups has dropped 22% since 2012, Warren writes. Venture capitalists are reluctant to invest in new companies that compete with the big guys, since they can either buy them, or crush them.

Warren outlined several proposals to break up big tech. She calls for designating tech platforms with over $25 billion in revenue that offer connections, exchanges, or a marketplace, as platform utilities.

Platform utilities would be prohibited from sharing data with third parties, for one. They would also not be allowed to own both the platform utility and any participants on that platform.

Google Search, Google’s ad exchange, and Amazon Marketplace would qualify as platform utilities, and those businesses would have to break up.

Warren calls wants to reverse anti-competitive mergers, such as Amazon and Whole Foods, Facebook and Instagram, or Google and Nest.

“You’ll still be able to go on Google and search like you do today. You’ll still be able to go on Amazon and find 30 different coffee machines that you can get delivered to your house in two days. You’ll still be able to go on Facebook and see how your old friend from school is doing.

Here’s what will change: Small businesses would have a fair shot to sell their products on Amazon without the fear of Amazon pushing them out of business. Google couldn’t smother competitors by demoting their products on Google Search. Facebook would face real pressure from Instagram and WhatsApp to improve the user experience and protect our privacy. Tech entrepreneurs would have a fighting chance to compete against the tech giants.”

The precedence of trust busting

Rapid industrialization during the late 19th century and early 20th century resulted in various social problems ― you know, child labor, terrible working conditions, poverty pay levels, grueling hours.

In the late 1800s social Darwinism was popular among the well-heeled. Social Darwinism justified eugenics, imperialism, social inequality, and racism with the theory of evolution and natural selection. “People become powerful in society because they are innately better,” was the idea, according to History.com.

In opposition to those ideas, progressivism rejected social Darwinism and argued that all human beings had a right to education, safety, efficiency. They quickly became a dominant voice in American politics.

After a number of large corporate mergers in the late 1880s, Congress passed the Sherman Act to combat fix pricing, market monopolization, or competition killing. It outlawed the monopolization of trade.

Its first vigorous enforcement was under Teddy Roosevelt’s administration. Later, in 1911 the Supreme Court ordered breakup of Standard Oil into 34 separate companies globally. The offspring of that breakup included ConocoPhillips, ExxonMobil, and Chevron.

Today’s progressives are worried about tech companies having too much power. Since its founding, Google has absorbed over 200 startups. Amazon is particularly ruthless with its power to undercut any potential competitor’s prices. Lawmakers have also targeted Facebook, with some arguing it should be broken up the way AT&T was in 1982, when it was carved into smaller “baby bells.”

The idea that Apple couldn’t sell its own apps on its own app store seems weird. But dystopian cyber-rule by three or four tech giants is even weirder. It will definitely continue to be a conversation through the 2020 elections.