After Senator Elizabeth Warren announced a plan earlier this month to curb the power of tech giants like Google, Amazon, and Facebook, her campaign did what any political campaign does these days: It took out ads to spread the message — on Facebook.
The company, whose flagship product is used by about 68 percent of Americans, removed them, saying they violated the platform’s policy on use of Facebook’s corporate logo. The ads reappeared only after the media and Warren had a field day: “I want a social media marketplace that isn’t dominated by a single censor,” the Democratic presidential candidate said on Twitter.
It would be hard to better encapsulate in a single incident why Warren, other Democratic presidential candidates, and many Republicans have grown increasingly leery of the power of Silicon Valley behemoths and their growing stranglehold on American life. Once seen as glistening American success stories, these companies are increasingly blamed for warping the economy, choking commercial competition and innovation, spreading hate and injecting poisonous ideas into the mainstream, and affecting the health of democracy here and abroad.
Last year, this editorial board called for breaking up Google, a virtual monopoly that accounts for more than 90 percent of all Internet searches.
But the problem clearly goes beyond one company, and beyond any single strategy to fight back. Warren’s proposal is not a silver bullet, but she’s onto something by challengingSilicon Valley’s giants. The era of self-policing must end; it’s time for reform and regulation in a substantive way.
The case for taking action is different for each of the tech giants. Google fits most closely into the traditional definition of a monopoly, because of its dominance in search, but Facebook and Amazon often behave in monopolistic ways too. Without any serious competitive pressures to fear, Facebook and Google (which owns YouTube) have also repeatedly failed to provide adequate moderation on their platforms.
One of the most obvious ways the big Silicon Valley companies have reduced competition is by repeatedly buying smaller startups, ensuring that none of them grow big enough to become a commercial rival. Some examples: Amazon’s purchase of diapers.com, Facebook’s purchase of Instagram and WhatsApp, and Google’s acquisition of Waze. The companies sometimes buy potential competitors then shut them down: Amazon closed diapers.com, a purchase that seemed to have no purpose but to neutralize an emerging competitive threat.
In other cases, the companies simply use their market power to undercut would-be rivals. This is the notorious “kill zone” — companies that the Googles and Amazons of the world either buy or kill.
Other threats to competition are more subtle, but no less pernicious. Many of the companies assume the role of platform as well as participant; as such, they can bend algorithms and rules to their advantage. Amazon sells electronics and clothes while also writing the rules for other companies selling on its platform. Apple runs both its App Store and sells products in it. Google offers both a shopping product — and determines where other shopping sites show up in Google results. The company’s double-dealing on shopping drew a $2.7 billion fine in Europe, but the potential for abuse won’t go away as long as the companies play dual roles.
What can be done? Here’s where to start:
• Beef up the Federal Trade Commission, which reviews mergers and provides consumer protection, by requiring the biggest companies to prove acquisitions won’t harm competition. Insist on stiff fines for violations. The FTC is investigating whether Facebook violated a 2011 consent decree on data privacy, and if it finds they have, it needs to levy a Facebook-sized fine.
• To address monopolistic tendencies, the federal government could restrict data collection. Regulators could require that when companies collect data from a customer for one purpose, and then later use that data for a different product (for example, Instagram data feeding ads on Facebook.com), it be required to account for the transfer in the same way as if it had paid to buy that data from a third party. Then the government could require the collectors of data to license it to competitors at the same fee, similar to how patents are licensed. Conversely, the government could just make it illegal for companies to share data collected across products for advertising purposes — meaning that one’s Instagram data could not add value to the ads seen on Facebook.
• Explore Warren’s idea of designating Big Tech companies as “platform utilities” somewhat akin to telephone companies — and subject them to tighter regulation and large fines for abuses. Warren’s idea of regulating them like utilities raises some knotty questions — including the danger that it would end up deterring would-be competitors — but lawmakers should at least examine it.
• Take a hard look at whether there are legal ways to force companies to divest ancillary businesses. The FTC recently formed a task force to examine the power of Big Tech and should use that process to determine whether it has the power to unwind mergers. If it doesn’t, Congress could provide it.
So why haven’t the feds been tougher on Big Tech already? One reason laws have been slow to catch up with the tech giants is because conventional understanding of antitrust law has required regulators to show that market concentration has resulted in some kind of direct harm to consumers. In this way of thinking, harm to competitors, or even to the broader market, isn’t enough to trigger Justice Department intervention: There needs to be some way in which consumers are shown to be paying higher prices. Since most services offered by Facebook and Google are free to consumers, proving harm under that standard is close to impossible.
In the legal community, some scholars have called for a rethinking of antitrust law to keep pace with technological changes and to reemphasize harm to competition. That’s an evolving debate, and it’s clear that Warren and some other lawmakers agree that it’s time to expand interpretations of antitrust law.
Still, while that debate plays out, there’s also a case to be made that the companies’ market power could be leading to consumer harms even under a more restrictive interpretation. Newly elected Missouri senator Josh Hawley, for instance, argues that the companies have made it impossible for consumers to participate in modern life without surrendering something of economic value — their personal information. “Any robust definition of consumer welfare must acknowledge that these companies have harmed consumers by conditioning participation in the modern public square on giving away enormous — and growing — amounts of personal information,” he wrote to the FTC earlier this month. Google and Facebook aren’t really free: Personal data has a dollar value.
Some harms, though, may be harder to express in financial terms and touch on deeper questions of how the companies affect society. The market clout of the tech giants is bad enough. But their sheer size also reduces their incentive to solve another problem: the ways that the platforms have been, and continue to be, abused.
Recent years have seen a growing awareness of the ways in which firms have allowed their platforms to be put to harmful uses. Facebook recently live-streamed a terrorist attack in New Zealand; Instagram’s algorithms steer impressionable teens to conspiracy theorists; YouTube suggests videos that send Americans deeper into their partisan corners. There is a wide recognition of the problem of online echo chambers and polarization fueled by social media, but without real competition, the companies have made only token efforts to stop it. Yes, it would be a challenge to catch live-streamed terrorist attacks in the moment, but the platforms have more aggressive ways to catch objectionable content when they want to.
And as we wake up to the harm — to Americans as consumers and entrepreneurs, and also to Americans as private citizens — the demands for change are growing louder. In the name of restoring competition to the marketplace, Warren called for unwinding Facebook’s acquisition of Instagram and WhatsApp; separating Amazon from Whole Foods and Zappos; breaking up Google and Waze, Nest, and DoubleClick. After the plan’s release, she expanded its scope somewhat by also pledging to break apart Apple and its App Store.
Among Democratic presidential candidates, Warren has offered the most detailed set of ideas to contain the companies, but she’s not alone. Senator Amy Klobuchar of Minnesota and Senator Bernie Sanders of Vermont are also calling for stricter regulation. On the Republican side, Hawley wants more aggressive investigations into the ways the companies use personal data.
President Trump also ought to see this moment as an opportunity to do better than his predecessor, who uncritically embraced the barons of Silicon Valley. It was President Obama’s appointees who allowed the tech companies to balloon into the threats they’ve become.
The pressure to crack down on Silicon Valley is growing. In Europe, regulators are hitting the companies with multibillion-dollar fine after multibillion-dollar fine, and Americans too have grown increasingly aware of the harm Big Tech is doing to our economy, political system, and society. It’s time for regulators and Congress to seize the moment.