In October 2020, the DoJ (Department of Justice) launched one of the biggest antitrust cases in US history, comparable with the lawsuit against Microsoft in the 1990s or the AT&T case of the 1970s. The target of the DoJ, in this case, was Google, but, in truth, it could have been any one of the ‘Big Five’ US tech companies, the so-called FAAMG – Facebook, Apple, Amazon, Microsoft ad Google – in the firing line.
Nevertheless, Google has been cited for anti-competitive practices involving its search engine, and, as the Washington Post pointed out, it could cause a “ripple effect” for consumers and smaller web companies “for generations”. This should come with a large caveat, however, given that any such action against Google is likely to take years. It’s understandable then that most tech companies, whether small, medium or large, will likely greet those actions in October with a shrug. After all, this threat has been hanging in the air for years.
But it is worth paying attention to, not least because of the timing of the announcement, coming a couple of weeks before the 2020 Presidential Election. While it’s difficult to find anything that Republicans and Democrats agree on at the moment, there seems to be a majority who believe that something should be done about Big Tech. What that “something” should be remains vague and contentious. Still, the DoJ’s move was broadly welcomed from voices on both sides of the aisle. Joe Biden has rolled-back a lot of Donald Trump’s decrees with a flurry of executive orders since taking power. But you get the feeling he agrees with the DoJ’s actions last autumn.
Elizabeth Warren has called for the break up of Big Tech
Indeed, can we imagine the not-implausible scenario where it was Elizabeth Warren, and not Joe Biden, who was on the top of the Democratic ticket and went on to win the election? Warren wrote an opinion piece in 2019 detailing how she would break up Facebook, Amazon, and Google. The Massachusetts Senator made some valid points, which we will highlight a little later.
Yet, one of the more interesting claims made by Warren – and others – is that the antitrust case against Microsoft in the 1990s, perhaps ironically, laid the foundation for the dominance of companies like Google today. While Microsoft didn’t get broken up, it’s doesn’t take a great leap to see how the outcome of that DoJ lawsuit paved the way for products like Google Search and Google Chrome. Indeed, some have claimed that Microsoft’s rise in the 1990s, in turn, owes a debt of gratitude to antitrust cases against IBM in the 1980s. Whether you agree with it or not, you can see why it makes a seductive argument that breaking up Big Tech could lead to better innovations in the future.
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But the cases of today are much more complicated than those of the 80s and 90s. For a start, it’s more difficult to argue an antitrust case when the consumer isn’t directly buying a product, as is the case with performing a Google search or opening a Facebook account. Moreover, we aren’t being forced to use these products, and alternatives are readily available.
Big Tech still has competition in all sectors
You could also argue that Big Tech’s dominance is a matter of perception, even when it comes to more quantifiable subjects like retail sales. If you consider, for example, Amazon’s fabled price wars against its smaller competitors in its retail sector. Warren, for instance, highlighted the case of Amazon’s destruction of a plucky upstart, Diaper.com. But the counter-argument is that Amazon’s retail arm does provide a platform for smaller competitors. The point is that Amazon has a large share of the retail market, but a healthy environment for competition still exists.
But going back to Warren’s opinion piece of last year, there are important issues raised that touch both consumers and smaller tech companies. For a start, Warren points out that there has been a 22% decline in first-round financing for startups since 2012 (the figures she used are current up until 2018). She also cited the fact that the number of startups, in general, has declined, citing an Axios article published in 2018. As for current figures, we await 2020’s statistics knowing that there will have been other disruptions, but most major studies have been pointing to decline, especially after the 2008 recession.
Politicians are relying on conjecture
One issue we can take with the Warren analysis, however, is that there is no evidence to back up the claim that the dominance of FAAMG companies has caused a lack of investment in startups. In fact, critics would point to the opposite, claiming that Big Tech in 2021 encourages startups. Consider initiatives like Amazon’s AWS Activate, which has a raison d’être to help startups in the first place. AWS can help any type of startup, from top online casino software providers available in India to new food delivery apps in Indiana. Startups would be all at sea if they did not have the foundation tools provided by Amazon, Google and Microsoft.
And the fact that Warren based that side of the argument on conjecture is one reason to be fearful of moves by Washington to break up Big Tech in the future. In short, we simply do not know what would happen, or if it will be ultimately beneficial to consumers, smaller companies, or business innovation in general. There are arguments to be made for that break-up, particularly concerning how users’ data is used. However, an approach with a scalpel might be preferable over a nuclear option.
In the end, though, the warning shot has been fired from the DoJ, and it is likely to be the start of more serious interventions in the 2020s. But the fear is that politicians may be treading into areas where they don’t fully understand the problem in the first place, and that might lead to disastrous consequences for the American tech industry.
Biden has many concerns as he looks to rebuild
While we are just a few weeks into Joe Biden’s tenure, the 46th President has made moves that suggest he wants to act quickly and ambitiously on a range of topics. But while Biden is said to be open the idea of doing something, it’s not quite clear what that something might be. Social media is said to be the top of his list to address, with Facebook in the firing line in particular. And yet, all talk of combatting Big Tech has taken a back seat in the early weeks of his administration.
If and when Biden decides to make a move, you should not expect Big Tech to take it lightly. We saw recently how Google threatened to pull put of Australia when demands were made to pay publishers for content. You might also expect resistance from other quarters, notably investors who rightly understand Big Tech as a driving force behind stock market gains. Moreover, any move to break up Big Tech will likely take years, and perhaps the will of multiple administrations.