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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.

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Comments About Big Tech Attracts Antitrust Attention from Senator Elizabeth Warren

Notable Replies

  1. 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.

    1. 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.

    2. 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.

  2. 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 simple 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.

  3. 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.

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