Photo by Edward Kimmel
Big Tech Attracts Antitrust Attention from Senator Elizabeth Warren
As the Democratic presidential primary contest gets started, Senator Elizabeth Warren has generated headlines with a post on Medium that proposes that the government break up Amazon, Facebook, and Google. In a subsequent interview with The Verge, she added Apple to the list, saying that Apple shouldn’t be allowed to run the App Store while also distributing its own apps. Her premise that the tech giants have too much power in today’s society isn’t entirely wrong, but as analyst Ben Thompson of Stratechery points out, her proposal:
would create massive new problems, have significant unintended consequences, and worst of all, not even address the issues Senator Warren is concerned about. Worst, it would do so by running roughshod over the idea of judicial independence, invite endless lawsuits and bureaucratic meddling around subjective definitions, and effectively punish consumers for choosing the best option for them.
At the moment, this proposal is largely political posturing, but the discomfort that many people—including us!—have with the behavior of the tech giants may keep it alive into the election and whatever US administration comes next. So it’s worth reading Thompson’s analysis to understand where Warren gets things wrong. Simultaneously, Thompson acknowledges that these issues are “critical not only for the world today, but also the world we wish to create in the future;” hence the importance of understanding the history, fundamental problems, and nature of the tech world.
I’m not sure what to make of her proposal. But I note that a lot of the objections I hear coming from my friends in the South Bay (with ties to the obvious companies) I find misguided for two simple reasons.
We made mergers happen. If we could make them happen because we thought they’d be good, we can also undo them if we see they have not been good.
I still remember well when Ma Bell was broken apart. If we had antitrust regulators that were capable of doing stuff like that to really big and powerful companies in the 70s, I don’t see why we shouldn’t be able to so something similar in 2019.
Britain is also leading the charge:
After reading his analysis again, I realize Ben Thompson is basically making the same mistake as Senator Warren, just from the other end of things. Essentially he accuses her of going in the right direction but getting her facts wrong. Well, he might have all his facts right, but he’s going in no direction. He goes on for paragraph after paragraph correcting her mistakes and nitpicking history here and there to arrive at… Well nothing really. No proposed action, nothing.
The bottom line here is that IMHO Senator Warren is heading in the right direction. It’s finally time for regulators to start regulating again. And it is in the public interest to make sure that not everybody’s (tech) lives are dominated by just one or a handful of companies. If she is mistaken about exactly why this or that happened, she can be corrected. But if we fail to take action, who will correct us? I didn’t know much about Senator Warren before, but after reading her thoughts on antitrust and tech I realize that she for one appears to know a lot more about tech than many other politicians her age and two, that she obviously has a substantially better understanding of markets than most of the well known politicians we regularly see and hear. And then I realize that maybe what I like is that I hear that she is first and foremost a scholar who then became a politician.
After all that said, his article does make a very nice point about differences in antitrust regulation here in the US vs. the EU. I think we would be well advised to adopt the EU paradigm that antitrust is about ensuring competition. Even if a company were to be so good that 95% of consumers chose their product so they then dominate that segment, it’s probably a good idea to break that company up. Giving a single market player that type of power will ultimately allow them to skirt market forces if left unchecked and history provides ample examples. Competition should be mandated and enforced if we want to reap the benefits of a capitalist system.
I think Thompson is intentionally not suggesting alternatives in large part because it’s not clear to him that simple breakups would actually address the problems. For instance, Amazon can prefer Amazon Basics products on its site, but Amazon Basics are a very small percentage of the company’s revenue. So breaking that apart wouldn’t really make any difference. On the other hand, Amazon Web Services produces a huge amount of profit for Amazon overall, but it’s not clear that it’s an inappropriate tying that should be targeted by a breakup.
Planet Money did a very nice three-part series of podcasts explaining how we got here, and how the thrust of antitrust enforcement moved from encouraging competition to protecting the consumer. Since it’s hard to argue that the consumer is being harmed by good free services from the tech giants (possible, but difficult), the point is that the pendulum will have to swing back toward encouraging competition for change to happen.
Ben starts a priori that big tech is helping consumers and is our friend. I don’t accept his underlying hypothesis which makes the rest of his article just blather as Simon eloquently points out:
No private company should be allowed to wield the power which Facebook or Google yield (Apple is riding on coattails here outside of iOS). Like Microsoft before them, they’ve been given a get-out-antitrust-free card as all three of those (Facebook, Google and Microsoft) are eager partners and agents of the US government.
Facebook and Google in particular are money making versions of the same surveillance state created by Josef Stalin and Lavrentii Beria and nurtured by Brezhnev and Andropov. All the information, all the time, in the hands of faceless bureaucrats. Who you talk to you, who you love, who you do business with, who you sleep with. They’ve got it all and it’s stored in Utah.
Those agencies have a vested interest in having a few large providers of data rather than many small ones. The more companies there are the more difficult and costly it is to maintain both the technology and the access relationships.
Anyone who believes in either freedom or privacy should strongly support an urgent breakup of these monopolies. The US government through its media agents will push back hard against taking action though.
I think you’re right that Ben Thompson assumes that big tech has generally been positive for consumers, but to an extent, I think usage bears that out. No one is forced to use Facebook in particular (it’s harder to avoid Google and Amazon), but billions of people still do. See
The main hesitation I have with breaking up the tech giants is that I’m not sure it will necessarily solve the privacy problems we’re seeing. There are many other companies that maintain vast amounts of data on us as well, and focusing on the tech giants would probably just give these other companies a leg up in abusing privacy even further.
At the moment, I come down more on the side of privacy legislation that gives users control over their data and forces firms that want to use it to compensate us for it in an open and fair fashion, if we choose to sell it at all.
As you say, “Microsoft before them”. Microsoft is now completely irrelevant to computing except for legacy things like Office and Windows. The world runs on Unix/Linux. macOS runs on BSD and Mach, iOS the same (probably less BSD), Android is Linux, server farms that one interacts with (Amazon and Google from what I’ve read) are just giant Linux server farms. Windows phones failed, Windows tablets are by all accounts very nice but a small minority of tablets sold. All this without the government breaking Microsoft up.
So far as I know, Twitter has never turned a profit. (I ditched my Twitter account long ago, and rarely look at anything on it.) Facebook is by all reports stagnating. Google+ (but not the rest of Google) is disappearing. There are competitors to all three. Not that I discount what problems they can cause (especially after Google dropped the “Don’t” from their motto) but I’m not sure heavy handed government regulation is the solution, and could easily cause even bigger problems.
The question IMHO is not if big data is good for consumers. It’s if de-facto monopolies are good for consumers.
Despite many high-profile privacy scandals hardly anybody has left FB. Why? Not because they feel attached to the company or enjoy being sold out, but because they have no alternative. If people want something like a ‘social network’ they are essentially forced to go with FB. That is a serious problem. MS in the 90s was somewhere around 90% of desktop and that was a de-facto monopoly. I’d argue when it comes to social networking (FB) or search (Google) we are in a similar situation today. Unlike Android vs. iOS (at least in the States) or Target vs. Walmart, these companies have gotten rid of any meaningful competition, their users are locked in, and therefore these companies can do whatever they want without repercussions. I’d postulate that is in no consumer’s interest. The only way to justify tolerating such de-facto monopolies IMHO would be if we had determined that they are essentially of technical necessity (like certain utility monopolies) or of greater benefit to consumers. But neither of those things have remotely been established in a convincing manner. (FTR, lock-in is a not a technical limitation, it’s an attempt at circumventing free market forces and competition.)
I do agree with you, Adam, that break ups won’t solve privacy issues. GDPR-like legislation would more likely help with that. But break ups would give consumers more power over how these companies deal with their data because they’d be faced with competition so that customers once again could vote with their feet. Considering how hard it is to get privacy regulation (not to mention the customer advocacy that can be expected from the current administration), I’m all for giving consumers the power they need to get companies to become serious about privacy even in the absence of more stringent government regulation.
I think you fall into the camp of believing that antitrust should be about fostering competition rather than protecting the consumer—I’m very much the same camp. With competition, a lot of ills can be addressed without regulations that will have their own downsides. But some regulation is going to be necessary because it’s just not in corporate interests (in general) to protect users.
Amazon Web Services has very stiff competition - Google, Oracle, Microsoft Azure, IBM, Adobe Cloud, as well as a bunch of competitors based outside the US. Like Apple, Amazon is highly diversified. Breaking up is different than opening up, which is what Spotify wants Apple to do.
I’ll be listening to these podcasts. I’ve been interested in trustbusting since I was in high school more decades ago than I care to admit. I was especially interested in the Microsoft antitrust case, in which Netscape was able to prove that Microsoft’s control of the OS of the vast majority of computers allowed them to monopolize the browser market. I’m far from anything resembling an attorney and I don’t know much about EU regulations about monopolies or restraint of trade, but it seems to me that because iOS devices are a minority in the mobile communications market, and Spotify is treated just as every other app in the App Store is, I think Apple might have a shot at beating the rap. But the EU does have stricter regulations than the US, and Spotifyis an EU based company.
Spotify has been subscriptions outside of the App Store for some time now; Netflix started doing this first. Spotify recently announced a growth spurt in subscriptions to 96 million paid users across the globe, though a big % of the new paid subscriptions have come in at lower rates, and Apple Music is available in fewer countries:
https://www.billboard.com/articles/business/8496809/spotty-fourth-quarter-financial-results-paid-user-totals-2018
It’s not like Spotify hasn’t gotten down and dirty against Apple in the past, including stuff like this:
https://www.bloomberg.com/news/articles/2016-08-26/spotify-said-to-retaliate-against-artists-with-apple-exclusives
Apple has a reputation for being the most popular streaming service with musicians, and this is one of the reasons why:
Spotify, Google, Pandora and Amazon have teamed up to appeal a controversial ruling by the U.S. Copyright Royalty Board that, if it goes through, would increase payouts to songwriters by 44%, Variety has learned.
A joint statement from the first three of those companies reads: “The Copyright Royalty Board (CRB), in a split decision, recently issued the U.S. mechanical statutory rates in a manner that raises serious procedural and substantive concerns. If left to stand, the CRB’s decision harms both music licensees and copyright owners. Accordingly, we are asking the U.S. Court of Appeals for the D.C. Circuit to review the decision.”
The four companies all filed with the court separately. Sources say that Apple Music is alone among the major streaming services in not planning to appeal — as confirmed by songwriters’ orgs rushing to heap praise on Apple while condemning the seemingly unified front of the other digital companies.
Not really, AWS has more than twice the market share of its next largest competitor (Microsoft Azure), but more important in my mind is it’s miles ahead of its competitors in terms of the range of cloud products it offers and how they work together. Sure, if you only need cloud storage or only think of servers in the cloud the same way you think of them in your own datacenter, you might look elsewhere; but there are savings and efficiencies to be found by breaking down needs into more discrete components, database-as-a-service, function-as-a-service.
In theory, you can mix and match individual services from multiple providers but all the big cloud providers encourage you to stay within their ecosystems by making data-in free but data-out relatively costly. Additionally, using multiple providers can mean slow down your services as data passes between providers before the end user sees the results and juggling identity and access management (IAM) with multiple providers adds a lot of complexity.
First, Office and Windows are still extremely important and dominant in their categories. Second, that’s far from all the Microsoft does; Xbox is second to Playstation and Azure is second to AWS but both are major players. Microsoft’s Surface products have been successful. Microsoft recognizes most servers run Linux so not only does Azure run thousands of instances of it, they’ve made it easy to run Linux on Windows to keep developers (and win some back from Apple). Microsoft Research does interesting work which has contributed to interesting products like the Hololens.
Microsoft is not at all irrelevant still needs to be watched for using illegal tactics to use their dominance in certain areas to “win” in others.
This is 100% true, and like Apple, MS has been broadening the scope of their services. They recently acquired LinkedIn, which adds a whole new dimension to their portfolio of business, financial analytics and HR products, including MS Dynamics ERP and CRM. They recently bought open source GitHub not long ago, most likely to strengthen relationships with, if I remember correctly, had around 25-35 million developers across the globe using its services. They own Skype and Skype For Business.
Though all their cloud services continue to grow exponentially, their on premise server and IT management systems are still going strong. SQL Server just ain’t what it used to be, but it is still very much alive and kicking. And they have a huge consulting business.
To add to Curtis’ observations, Microsoft has a portfolio of investments in general entertainment and communications, including Comcast, NBC, Facebook, and a chunk of Apple that they bought to stop Steve Jobs from continually suing them when Microsoft was slugging it out antitrust case that was being argued before the US Supreme Court.
I thought that was sold years ago.
GitHub: October 2018
Linked In: June 2016
Neil, were you referring to Microsoft selling its stake in (MS)NBC? That did happen in 2012. Microsoft sold its Apple stake in 2003 and its stake in Comcast in 2009. It still has a piece of Facebook, whoownsfacebook.com says 1.6%. I think Wikipedia’s List of mergers and acquisitions by Microsoft is a good list of acquisitions and stakes but not good for tracking current value or divestments.
Thought we were talking about MS owning some Apple stock and the only instance I was aware of was the $150 million or whatever it was way back when… it maybe I dropped sync on what stock was bing talked about.
There are very successful US based social media companies besides Facebook, including but not limited to Twitter, Pinterest, YouTube, etc. Though it’s not US based, TikTok is coming up very strong. And there are other search engines, including Bing, DuckDuckGo and Yahoo, and Google is not doing anything that would stop another company from developing one. Their problem is that, to date, none of them is as good as Google; hardly anybody wants to use them.
I’ve mentioned this here multiple times recently…Microsoft lost its antitrust lawsuit because of restraint of trade. Netscape proved that MS made it totally impossible to install another web browser on Windows. Apps that are not bought from Apple’s App Store can be sideloaded on iOS devices. For the past few years, it’s the only way to install Netflix on iOS or Macs, and it doesn’t seem difficult at all:
It was $150 million, and it was a brilliant move, or rather repeated kicks in the private parts, that Steve Jobs inflicted on Bill Gates. At the time, Microsoft was in the midst of its antitrust woes with the US government. Steve Jobs was hitting them with mega patent and intellectual property lawsuits that were getting, along with the Netscape vs. Microsoft anti trust Supreme Court trial, big time, front page, mega coverage in the news. Steve, who was brilliant at handling the press, was milking it for all its worth, making MS look like an even badder boogeyman for trying to destroy poor little struggling Apple by stealing its critical intellectual property. In exchange for the desperately needed cash, Steve agreed to keep his mouth shut and call off his legal team, but not without a series of passive-aggressive digs, such as this one:
This seems a bit confused. There’s no need to sideload Netflix on an IOS device; you can download it from the App Store without any trouble. What those articles (or at least the third one) are about is sideloading the iOS version of Netflix on an M1 Mac. Which is a different thing. And unnecessary because Netflix works fine via your browser on a Mac anyway.
Microsoft Azure is currently the second largest global cloud services provider. They are slowly but maybe surely catching up to Amazon:
Microsoft Dynamics continues to grow rapidly, and is expected to beat Salesforce. This is probably why Salesforce recently bought Slack for $2.27 billion recently:
They also own Skype, LinkedIn, Microsoft Teams, Aquantive, Xbox and games they develop and sell in their app store, Clickstream, and lots and lots of other stuff. It’s predicted they will soon join Apple as the only other member of in the $2,000,000,000 club. So I wouldn’t write them off so quickly.
I wasn’t clear. You can’t subscribe to Netflix via the App Store:
And you can’t pay for it via iTunes either:
This is an old discussion and let’s not reopen it to rehash points that have been made before.