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What does breaking up Big Tech really mean?

Last fall, the Federal Trade Commission and 48 state attorneys general filed a lawsuit against Facebook, accusing it of illegally maintaining a monopoly on the social networking space “through years of anti-competitive conduct.” Soon after, the US Department of Justice and 11 state attorneys general filed a lawsuit against Google, accusing it of illegally maintaining a monopoly in the search and search advertising markets. Apple is currently locked in a civil lawsuit with game developer Epic Games, which is challenging Apple’s control over its App Store on antitrust grounds.

Last summer, the US House Judiciary Committee concluded a 19-month investigation into alleged anti-competitive activities by tech titans. The resulting 450-page report described the companies as “the kinds of monopolies we last saw in the age of oil barons and railroad tycoons” and recommended that the government take action. measures against them.

It is easy, of course, to dismiss anything that comes from Washington or Brussels as a political attitude, but in this case it would be a mistake. President Joe Biden has named some of Big Tech’s sharpest and most vocal critics, including Columbia University professor Tim Wu, author of the book The curse of greatness, and Lina Khan, who served as special advisor to the Judicial Committee during its investigation, has important roles in its administration. Europe is implementing stricter regulations in an attempt to limit the power of Big Tech. And antitrust action, at least as far as the tech industry is concerned, has become the rarest thing: a bipartisan issue in Congress.

What is arguably more important is that we are in the midst of a drastic shift in the intellectual discussion, a shift that has made it much easier to tackle Big Tech. In many ways, we seem to be going back to the antitrust view that shaped U.S. big business policy for much of the 20th century, a view that is much more skeptical of the virtues of size and much more willing to be aggressive. to prevent companies from exercising monopoly power.

The main American antitrust laws were written at the turn of the 20th century. The Sherman Antitrust Act of 1890 and the Clayton Act of 1914 are still in effect today. They were written in broad, expansive (and ill-defined) language, targeting monopolists who engaged in what they called “trade restriction.” And they were driven in large part by a desire to curb the giant trusts that, through a series of mergers and acquisitions, had come to dominate the U.S. industrial economy.

The quintessential example was Standard Oil, which had built an empire that gave it essentially complete control over the oil industry in the United States. But antitrust law has not been used just to block mergers. It has also been used to put an end to a multitude of practices deemed anti-competitive, including some that now seem routine, such as aggressive discounts or the purchase linked to the purchase of a good by the purchase of a other.

In reality, the four companies have very different businesses that raise very different antitrust issues and will lend themselves to very different antitrust solutions.

That all changed with the Reagan administration in the 1980s. Instead of worrying about the impact of big business on competitors or suppliers, regulators and courts began to focus almost entirely on what was being done. called the “consumer welfare”. If a merger or a company’s practices were shown to result in higher prices, then it made sense to intervene. If this was not the case, antitrust regulators generally took a hands-off approach. That’s why Facebook’s acquisitions of Instagram and WhatsApp, Amazon’s acquisition of Zappos, and Google’s acquisitions of DoubleClick, YouTube, Waze, and ITA all went through the regulatory approval process without a hitch.

No more, however. Over the past four or five years, academics, politicians, and public advocates have started to come up with a new idea of ​​what antitrust policy should be, arguing that we need to move away from this narrow focus on welfare. consumers – which in practice focuses on prices – towards taking into account a much wider range of possible damages resulting from the exercise of market power by companies: damages caused to suppliers, workers, to competitors, to customer choice and even to the political system as a whole. They did it, unsurprisingly, with the Big Four in mind.

But what exactly would Big Tech’s harnessing the power look like? Short answer: it depends a lot on the company you are looking for.

The targets

While antitrust advocates often rhetorically bring together Apple, Amazon, Google and Facebook, creating a memorable image of four giant “gatekeepers” collectively controlling access to the digital economy, in reality the four companies are very much in business. which raise very different antitrust issues and will lend themselves to very different antitrust solutions.

JA21 9780525654896 What does breaking up Big Tech really mean?

Take, for starters, Apple. It is the most valuable company in the world, with a value of over $ 2 trillion at the time of writing. It is also the most profitable company in the world. And yet, when it comes to discussing antitrust and Big Tech, Apple often seems like an afterthought. In Wu’s book, Apple barely makes an appearance, and in Senator Amy Klobuchar’s new book, Antitrust, which is a resounding call for the overhaul and enforcement of anti-monopoly policy, Apple’s discussions seem more superficial than central to its thesis.

Perhaps this is largely because Apple has become a giant on its own. Although it has made many acquisitions, its recent growth is mainly due to the simple fact that it has introduced three of the most successful and lucrative technology products in history. , and continued to convince customers to keep moving to the next generation of products. Even in this new world, it’s not illegal to have huge success building the proverbial best mousetrap.

True, Apple has antitrust issues, which center on its requirement that all developers who create iPhone and iPad apps sell their products through the App Store, with Apple collecting a 30% fee. So it’s possible that Apple will end up letting developers sell directly to consumers, or even allow independent app stores. Even so, he could still collect license fees from any app that wanted to be on the iPhone. And most users would, in all likelihood, continue to use the App Store, if only for habit and convenience.

So in the grand scheme of things, Apple doesn’t seem to have too much to worry about mounting antitrust pressures.

Amazon‘s situation is more complicated. She too has organic growth going for her; Although he has done his share of acquisitions, he has grown mostly on his own, driven by his relentless appetite to sell more, his huge investments in infrastructure and his willingness to spend huge sums of money. to win and retain customers. His biggest antitrust problem stems, paradoxically, from something he himself created: the Amazon Marketplace.



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