Tech's New Monopolies

(Bloomberg) -- Technology superstars Facebook, Google, Amazon and Apple are in the crosshairs of U.S. and European Union regulators who are zeroing in on the downside of their dominance. Their unquestionable size and power and (in the case of all but Apple) aggressive buyouts of would-be rivals are facing broader scrutiny from antitrust enforcers. Reigning over markets including internet search, digital advertising, online commerce and mobile apps, they’ve become some of the most valuable companies in the world in part by exploiting so-called network effects — as they get bigger, they become ever more enticing to users.

The Situation

For more than a decade, the EU has been the most aggressive jurisdiction in regulating Big Tech, fining Google more than $9 billion in three separate cases for using its dominance to disadvantage potential rivals. The EU has a lower bar for what constitutes harmful conduct by a monopoly and, in contrast to the U.S., its competition commissioner can move to block a merger without seeking a judge’s approval. In mid-2019, U.S. antitrust regulators at the Justice Department and the Federal Trade Commission began ramping up their oversight, and they were joined by the attorneys general of 48 states plus the District of Columbia and Puerto Rico, who opened an investigation into Google’s advertising practices. In some quarters, there’s talk of going beyond probes and fines to rewrite the rulebook or even break up the tech firms. A panel appointed by the U.K. government envisions a new regulator that could force tech companies to share data on customers with smaller competitors. U.S. Senator Elizabeth Warren, campaigning for the Democratic Party’s 2020 presidential nomination, called for unwinding mergers such as Amazon’s purchase of grocer Whole Foods, Google’s deal for ad network DoubleClick and Facebook’s acquisitions of photo-sharing site Instagram and messaging service WhatsApp. Warren would also make companies choose between operating platforms and offering products on them. This would force Amazon, for example, to decide whether to keep its online marketplace or its private label, AmazonBasics.

The Background

Being a monopoly isn’t illegal in the U.S. or in most other countries, as regulators long ago stopped equating big with bad. Traditional antitrust enforcement focuses on whether a dominant company uses its power to thwart competition and raise prices — a mostly moot point in the case of free services such as internet search and social media, which generate revenue through targeted advertising. The last major anti-monopoly case brought by the U.S. was against Microsoft Corp. in the 1990s. During the ensuing 20-year dry spell, the U.S. mostly watched from the sidelines as tech juggernauts used their profits and big-data advantages to gobble up smaller rivals. Some economists, lawmakers and tech experts say enforcement has been too timid. They’re urging wider scrutiny of dominant companies to take into account, for example, the effects of concentration on innovation, employment and consumer privacy. A fresh line of thinking labeled the New Brandeis School (and derided as “hipster antitrust” by critics) would rewrite the playbook entirely and prevent, for example, tech platforms from vertically integrating into other lines of business.

The Argument

The tech giants say rival services and products are springing up all the time, threatening their market dominance. Rather than stifle competition, they say, their platforms enable up-and-coming businesses to advertise and sell. But regulators and lawmakers worldwide appear to have run out of patience with those defenses. In addition to new rules and fines over the use of personal data, the companies have been blamed for a litany of ills including killing off local retailers, enabling addictive online behavior, disseminating dangerous propaganda and amplifying hate speech. A growing body of research documents the relationship between rising corporate consolidation — a phenomenon not exclusive to tech — and worrying economic trends such as tepid wage growth, reduced business investment, fewer startups, a drop in the number of important patents and worsening wealth inequality. 

The Reference Shelf

• A guide to the U.S. antitrust case against Big Tech.
• The enormous numbers behind Amazon’s market reach.
• France’s antitrust regulator is wary of Apple Pay and Facebook’s foray into online payments.
• Antitrust problems are just the start for giant technology companies, Shira Ovide writes in Bloomberg Opinion.
• The Harvard Business Review considers “the rise, fall and rebirth of the U.S. antitrust movement.”

To contact the editor responsible for this QuickTake: Laurence Arnold at larnold4@bloomberg.net

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