Breaking up is hard to do
CLXXXV
Hello and welcome to Oversharing, a newsletter about the proverbial sharing economy. If you’re returning from last week, thanks! If you’re new, nice to have you! (Over)share the love and tell your friends to sign up here.
Back in May, I said my relocation to London would involve picking up coverage of European efforts to regulate Big Tech. This week Oversharing is taking a detour from the sharing economy to talk about that.
It’s a good time for it. The EU recently appointed Danish politician Margrethe Vestager to an unprecedented second term as competition chief and also named her head of digital policy. Vestager made a name for herself during her first term by bringing hefty fines against tech conglomerates, including a record €4.3 billion fine issued to Google in July 2018 for restrictions it imposed on Android device manufacturers and mobile network operators to protect its dominance in search.
In the US, the word we use to talk about regulating corporate bigness is antitrust. Here in Europe, the phrase is competition policy. The questions on both sides of the Atlantic are the same: How big is too big? Is tech different? If something must be done to rein in the tech giants and reanimate competition, then what?
I survey the history of monopolies, competition policy, and current probes into dominant tech platforms in the US and Europe this week in a series for Quartz, “Taming Big Tech.” The stories live on Quartz’s members site but I’m including bits of them here. I would also be an irresponsible employee if I didn’t encourage you to sign up for a Quartz membership, which you can get for 50% off, or $49.99 for the first year, with my code ALI0299. That’s, like, a week of Blue Apron, and a much better value.
Is Big Tech too big?
Big Tech is not just big, it is inescapable in modern life. The world’s five most valuable public companies are all American technology groups—Apple, Microsoft, Alphabet (neé Google), Amazon, and Facebook. They are collectively worth $4.6 trillion.
Technology moves fast, but even by its standards these tech giants emerged in a stunningly short period of time. Amazon was founded in 1994, Google in 1998, Facebook in 2004. It wasn’t that long ago that these behemoths were seen as the underdogs. Measured in human years, Google just this year became legally old enough to drink. Facebook doesn’t have a driver’s license yet.
There is now a growing global consensus that Big Tech is too big. Google today commands 73% of the US search ad market. Amazon controls roughly half of US e-commerce and 5% of all US retail sales. Amazon also holds nearly half of global public cloud services through AWS, and is carving out a sizable chunk of search. Facebook counts 2.2 billion daily active users across Facebook, Instagram, WhatsApp, and Messenger. That’s nearly 30% of the entire global population.
How did we get here?
In the beginning, American politicians viewed monopolies and unchecked private power as a threat not only to competition but also to democracy. But sometime in the mid-20th century, America lost touch with these principles. In their place emerged a new school of thought that held that monopolies weren’t bad in and of themselves; they were only bad if their control of an industry led to higher costs for consumers. This laissez-faire framework became known as the Chicago School of antitrust, and its singular focus on how monopolies affected consumers the “consumer welfare” standard.
The Chicago School of antitrust and its consumer welfare doctrine paved the way for Big Tech’s dominance. Google consolidated the ad market through acquisitions, most notably a $3.1 billion purchase of competitor DoubleClick in 2007 that the FTC deemed “unlikely to substantially lessen competition” after an eight-month investigation. “This acquisition poses no risk to competition and will benefit consumers,” Eric Schmidt, then Google’s CEO, said at the time. Amazon bought up e-commerce competitors, often after bleeding them dry with race-to-the-bottom pricing. It also resolutely lowered prices and preached the gospel of “customer obsession.”
What’s going on right now?
In Europe, led by competition chief Margrethe Vestager:
A formal European Commission investigation of Amazon regarding its use of data from independent marketplace sellers
A complaint filed by Spotify against Apple with the European Commission in March over Apple’s control of the App Store
An EU investigation into Facebook’s Libra digital currency
In the US, where antitrust has emerged as a rare issue with bipartisan support:
Fifty attorneys general from 48 states are investigating Google…
…and 47 are investigating Facebook
The US Department of Justice is scrutinizing unnamed “market-leading online platforms” over whether they reduced competition, stifled innovation, or harmed consumers
The Federal Trade Commission is probing Facebook on antitrust grounds
The US House Judiciary Committee is investigating “competition in digital markets” and has sought information from Facebook, Amazon, Google, and Apple on matters including market share, competitors, pricing strategies and algorithms, correspondence related to acquisitions, and data collection
Also in the Quartz series:
It will take more than big fines to tame Big Tech. Since 2017, the European Commission has fined Facebook, Google, and Qualcomm a collective €9.6 billion for anticompetitive conduct. But to companies the size and scale of Google, even multibillion-euro fines are just another cost of doing business.
The best way to tame Big Tech isn’t necessarily to break it up. My colleague Allison Schrager, a bona fide economist, makes a case for “participative antitrust” and other novel approaches to regulation.
Is monopolization inevitable in the digital era? I chat with Matt Stoller, a fellow at the Open Markets Institute and author of Goliath: The 100-Year War Between Monopoly Power and Democracy, about his favorite corporate villain and whether consumers should try to cut Big Tech out of their lives. (I also recommend signing up for his excellent email newsletter, Big.)
Why is it called antitrust? Before there was antitrust, there were trusts.
ICYMI.
Thank you SoftBank for making my week with this chart.
Famously eccentric T-Mobile CEO and Adam Neumann hair twin John Legere is in talks to become CEO of WeWork.
T-Mobile shareholders didn’t like it.
Wait I fixed it.
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Send tips, comments, and breakup stories, antitrust or otherwise, to @alisongriswold on Twitter, or oversharingstuff@gmail.com.