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Why Amazon, Apple, FB and Google are in the dock. It’s not just about economy

Even if the US Congress enacts new legislation, short of breaking up Big Tech, antitrust actions will not directly take on its bigger power.

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There was quite a bit of symbolism when the CEOs of Amazon, Apple, Facebook and Google appeared before the anti-trust committee of the House of Representatives of the US Congress last week. Here were the heads of the world’s most valuable companies, captains of the tech industry and some of the world’s richest men summoned to defend themselves before elected representatives of the world’s most powerful state.

All four men looked suitably humble and contrite. They even dispensed with their trademark Silicon Valley superhero costumes for the sober formal suit — well, at least on their visible upper bodies. So, here was the State demonstrating its supremacy over private companies, with the richest merchants of the kingdom bowing before the monarch’s court.

Yet, the hearing itself was conducted using a videoconferencing application over broadband internet, demonstrating just how dependent the modern State is on technology companies. Despite the Covid-19 pandemic — and indeed because of it — the four companies have outperformed the rest of the US economy. Together they are currently worth almost $5 trillion. On the day of the anti-trust hearing, they, together with Microsoft, represented over 20 per cent of the Standard & Poor’s 500 stock market index. Such a concentration of wealth is extraordinary and has taken place after 42 years. As for ordinary citizens, as a New York Times journalist admitted, it is impossible to live without using the technology and services they provide.

Also read: US lawmakers are keen to break up big tech like Amazon, Google and Facebook. It’s not smart

More than just economics

It’s not just that Big Tech enjoys market dominance — it is that they have created markets where individuals, businesses and governments are practically trapped in. What we have discovered over the past three decades is that network effects tend to cause extreme and rapid concentration of market power — the winner takes all. So, it is appropriate for lawmakers to be concerned.

The economic effects are just the tip of the iceberg. A bigger and less visible consequence of big technology firms enjoying market dominance is that they collect, control and use massive amounts of customer data, which gives them the power to subtly change people’s preferences. The political effects of big technology platforms have begun to rightly worry everyone, especially politicians and elected officials. The challenge from Big Tech monopolies is as much political as economic, but is being tackled as a purely economic one.

That is why the first instrument that the State has found to manage the rising power of Big Tech is competition law. For indeed, Big Tech buys out competitors, copies features from independent developers, and competes with its own customers. The House of Representatives committee, especially the Democrats on it, read out this charge sheet in considerable detail and is quite likely to recommend legislation to restrict many business practices that, in its view, stifle competition.

There is a degree of bipartisan consensus on this, but it is not going to be easy, for it is incredibly hard to show that consumer interest has been harmed through overpricing or restriction of choice. Instead, Wired’s Gilad Edelman writes, the committee has “identified a different vulnerability: Big Tech monopolies might not always lead to higher prices, but they can lead to lower quality products, including when it comes to user privacy”.

In fact, the Republicans on the committee were closer to the mark with their concerns over the control of data and platforms to shape the public discourse. Unfortunately, they were off-target too, spending time and energy complaining about conspiracies to stifle Right-wing discourse.

Also read: Why TikTok could be the deal of the decade for Microsoft and Satya Nadella

Rules for democracies

Even if the US Congress enacts new legislation in the near future, short of breaking up Big Tech, antitrust actions will not directly take on the underlying political power that the platforms have. In fact, there is a reasonable case to argue that the fear of monopolies in the technology industry are overblown because investors and entrepreneurs have powerful incentives to disrupt incumbents’ business models and monopolies. Notice how IBM and Microsoft, targets of the world’s antitrust regulators in their own time, were absent from the latest hearing.

Given this weakness, democratic countries will have to evolve new norms, involving re-interpretations of the balance between individual liberties and powers of the State, to be able to squarely address the political power of technology platforms.

Also read: Sundar Pichai, Zuckerberg, Bezos grilled by US Congress over their power to ‘crush rivals’

Secure countries

Arguments for breaking up Big Tech are also coming from another quarter: national security. In an essay, Ganesh Sitaraman, professor at Vanderbilt Law School, argues, “Far from competing with China, many big technology companies are operating in the country, and their growing entanglements there create vulnerabilities for the United States by exposing its firms to espionage and economic coercion.” He makes a compelling case that an industry consisting of many small, competitive firms would be better able to resist being co-opted, censored or compromised by hostile foreign adversaries.

How the United States chooses to govern Big Tech will have implications for the whole world. The breaking up of AT&T in the 1980s marked the beginning of the deregulation of telecommunications across the world and the phenomenal growth of the internet. If Big Tech is indeed broken up — whatever that means — the consequences will be similarly global.

The author is the director of the Takshashila Institution, an independent centre for research and education in public policy. Views are personal.

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  1. After the breaking up of AT & T in th emid 1980s, there was no major anti-trust proceeding in the US. Now, the major problem is that anyone of these big tech companies be a sellout to china or other similar hostile country in terms of data, privacy and not just money. Government has to watch helplessly. If anti-trust laws don’t work, US government may bring new special laws to address these data security, and privacy concerns, not to speak of national security issues.

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