Washington DC and many gadflies in the tech industry live in a fantasy world when it comes to big tech companies.
In this fantasy world, the tech industry is completely dominated by four massive companies: Alphabet (Google’s holding company), Amazon, Apple, and Facebook. Some people have also started to include Microsoft, given that they are the second most valuable company in the world, and big is bad, in this view.
These companies have stifled innovation, restricted opportunities, hurt consumers, and hurt society. The only way to curb your damages is to broaden the definition of antitrust to fit the specific circumstances of these companies, then use these new antitrust violations to impose fines and behavioral remedies, and undo past acquisitions. To this end, a congressional subcommittee last week pushed six separate technology antitrust bills through the markup, setting the stage for one or more of them to become law.
This week’s events should offer a cold touch of reality to advocates of this point of view.
On Monday, a district judge dismissed antitrust complaints that the FTC and 48 state attorneys general filed against Facebook. US District Judge James Boasberg, in an opinion filled with withering sarcasm, not only dismissed the FTC complaint on a technicality or a decision of the law, but undermined the cornerstone of the argument by ruling that the The FTC did not prove that Facebook had a monopoly or market power.
“The FTC complaint says almost nothing concrete about the key question of how much power Facebook actually had, and still has, in a properly defined antitrust product market,” the document reads. “It’s almost as if the agency expects the court to just nod to the conventional wisdom that Facebook is a monopolist.”
On Wednesday, the tech industry saw five companies debut on the public equity markets. One of them, the Chinese giant Didi, is worth almost $ 70 billion. Two others, Taboola and Integral Ad Science, compete in the online advertising industry, one of the markets that has allegedly been ruined by Alphabet (in particular) and Facebook.
More broadly, this year has seen the hottest IPO market in years, and investors continue to accumulate new companies at a record pace – the first quarter saw more than $ 64 billion in hedge funds, a record.
This doesn’t seem like a desert wasteland of stifled innovation and broken dreams.
Meanwhile, the general public does not see technological power as a particularly urgent problem. In a survey funded by a tech industry group, 44% of respondents ranked tech industry regulations as the lowest priority on a list of five choices, behind economics, public health, climate change and infrastructure. Yes, 53% of those surveyed thought that some legislation was a good idea. But that does not mean that the public wants Congress and the courts to point the antitrust cannon at these giants.
As I wrote four years ago, antitrust policy is the wrong approach here.
Neither of these companies has monopolies on relevant markets defined in a meaningful way; you really have to stretch and squeeze the market definitions to make your domain show clearly. The real state of the tech industry is an all-out trade war between the five giants, an ever-changing landscape of rivalries and backbiting (think of the Great Powers of Europe before WWI) with numerous well-funded competitors from all over. the sizes waiting to Take advantage of any opportunity and fill any gaps they leave open.
- Google dominates search and Facebook is by far the largest social media company. But the main source of income is online advertising, and they compete bitterly for every dollar available in online advertising, with Amazon quickly trailing behind. And yet there is still enough room for TikTok, Twitter, Snap, and a dozen small competitors in ad tech to build sustainable and thriving businesses with advertising.
- Amazon, Microsoft and Google are locked in a tough three-way war for supremacy in cloud computing infrastructure. And yet there are dozens of companies providing thriving cloud services on or alongside these platforms, including Snowflake, which debuted last year and is now worth more than $ 70 billion, and Zoom, which went public in 2019 and is worth almost $ 115. Billion.
To be perfectly clear: yes, it is in the public interest to regulate these tech giants more strictly.
For example, Google’s Facebook and YouTube exert enormous influence over public discourse and politics by allowing misinformation to spread almost uncontrollably.
Amazon and Apple control extremely valuable markets that reach hundreds of millions of people, and they can use this control to pit providers against each other for potentially onerous fees.
Union advocates allege that Amazon illegally interfered in a recent attempt to unionize in Alabama, and many workers have complained about working conditions in warehouses and delivery vehicles.
All companies have used acquisitions to enter adjacent markets and possibly to suppress potential competitors before they grow too large, a tactic that is also used by companies outside of the Big Five, such as Oracle in recent years and Salesforce more recently.
Several of its founders are now centimillionaires, a perfect example of the huge income inequality that many progressives believe must be curbed.
But all these activities can be addressed with specific regulations or with a stricter application of existing laws. Antitrust is a powerful instrument aimed at addressing the major market distortions created by true monopolists. Being big, in itself, is not illegal. Applying antitrust law to these companies is wrong, wrong, and will not have the desired effect of significantly curbing their power.
But hey, it’s great for lawyers.