Why Washington’s war on Big Tech will fizzle – By James Pethokoukis (The Week) / June 6 2019
Apple is breaking up iTunes into three separate apps, one each for music, TV shows, and podcasts. But don’t expect Washington to go even further and break up Apple itself — or Google, Facebook, or Amazon, for that matter. Washington’s war on America’s largest technology companies may have just escalated, but the political endgame will likely find Big Tech as big and powerful as ever.
For now, though, anti-tech activists and policymakers are pretty pumped on news that regulators and lawmakers are gearing up to scrutinize the tech titans. The Justice Department and Federal Trade Commission have apparently divvied up investigative authority over the companies. The DOJ is getting Alphabet-Google and Apple, with the FTC having oversight over Facebook and Amazon. Meanwhile, the House Judiciary Committee on Monday announced it will hold hearings into whether there’s enough competition in the tech sector. Taken together, the actions suggest broad support across Washington for the notion that Big Tech has become a problem.
Of course, plenty of folks are already there. “Is it time to break up [insert name of large U.S. tech company]?” hot takes are ubiquitous these days, with concerns about corporate power, privacy, inequality, innovation, and addiction all given as reasons for dramatic action. Senator Elizabeth Warren has made antitrust action a core element of her presidential campaign and embraced news that Google is facing imminent investigation, tweeting, “It’s time to fight back.” And Senator Josh Hawley, a Missouri Republican who recently wrote that society might be better off if social media disappeared, tweeted, “This is very big news, and overdue.”
But they and other tech critics might well be composing such tweets and opinion pieces for years. American antitrust doctrine is all about penalizing companies for being bad, not big, and in ways that harm economic welfare. It’s tough to make a broad antitrust case against companies that offer free, innovative services that consumers greatly value.
Take Google, for instance. One recent research survey found consumers would need to be paid nearly $20,000 to give up using free search. And it’s hard to slam a company as being bad for innovation when it spent more than $21 billion last year on R&D and billions more on “next big thing” moonshot bets that may never pay off. Or as an equity analyst at D.A. Davidson recently wrote about Amazon, “At its core, Amazon lowers prices to the consumer. Therefore, we believe it is difficult to prove it operates an unhealthy monopoly and thus it is hard to envision the company losing an antitrust case.”
Of course doctrine isn’t law and legal philosophies can evolve. New theories might make regulators more willing to force Alphabet-Google to dump YouTube or Facebook to split off Instagram and WhatsApp. But such maximalist moves are rarely successful. The feds dropped their case against IBM in 1982 and ended up settling with Microsoft in 2001. Yet some activists are pushing to break up no fewer than four major companies worth a combined $3 trillion. Seems unlikely given American business history. Nor should critics count on legal actions distracting the companies so much that they lose market share. This supposedly happened with Microsoft because of the government’s legal actions against it. Yet it seems at least equally likely that Microsoft, a big, bureaucratic, slow-moving incumbent, simply failed to adjust to secular business shifts such as mobile computing.
Indeed, it’s market forces, not government actions, that are mostly likely to erode the dominance of Big Tech, even if the investigations result in European Union-level fines and a change in some business practices. Maybe the activists should try reading some quarterly reports from time to time. Alphabet’s most recent showed a big slowdown in Google’s ad business as it faces a growing challenge from Amazon. And while the online retailer might seem an unstoppable juggernaut, Wall Street analysts see a company surrounded by tough competitors such as Walmart and Costco, as well as the other Big Tech firms. Young adults are fleeing Facebook, which is trying to reinvent its business model to one that focuses less on targeted ads. Can Apple shift from hardware to services?
These “forever” companies face a host of challenges that never seem to get mentioned in the rush to dismantle or regulate. Of course, regulation can often help incumbents, too. This seems to be happening with Europe’s year-old data protection rule, which is increasing the ad market share of Google and Facebook vs. smaller competitors. If Big Tech stays big and avoids the natural churn of a market economy, the unintended consequences of government action rather than anti-competitive behavior might be to blame.
Illustrated | OstapenkoOlena/iStock, Shendart/iStock, Dzyuba/iStock, gonin/iStock
https://theweek.com/articles/845213/why-washingtons-war-big-tech-fizzle
