AS CAMPAIGN visions go, it is one that most people can get behind. US 2020 presidential hopeful Elizabeth Warren just wants tech companies to play by the rules.
“You don’t get to be the umpire and have a team in the game,” the Democrat senator told an audience last week, describing how she believes Amazon exploits its market position to smother competitors.
But the way she wants to achieve this could prove divisive. “My administration will make big, structural changes to the tech sector to promote more competition – including breaking up Amazon, Facebook, and Google,” she said in a .
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Warren is far from the first to make this call. Over the past few years, the companies on her hit list have been accused of perverting democracies, amplifying hate crimes and stifling rivals.
“How big do these companies have to be before they’re considered too dominant?” says Martin Moore at King’s College London. “When you have more than a quarter of the world’s population on your platform, that qualifies in any book.”
Still, most public figures taking on these juggernauts – chief among them Margrethe Vestager, the European commissioner for competition – have stopped short of a break-up. Instead, we have seen new rules, such as the EU’s General Data Protection Regulation, and large fines.
For example, Google has been hit with a string of whopping fines for abusing its market dominance in the EU, including €2.4 billion in 2017, €4.3 billion in 2018 – the largest fine ever – and €1.5 billion in March. But set against the annual revenue of Google’s parent company Alphabet (more than $136 billion in 2018), they just look like a cost of doing business.
“I don’t want to call them parking tickets, but these are small fines for companies that make so much a year,” says Cristina Caffarra, head of European competition practice at consulting firm Charles River Associates.
So if the fines aren’t working, is Warren right to call for a break-up? It has been done before. In the 1990s, the US government charged Microsoft with gaining an unfair advantage. By including its web browser, Internet Explorer, on computers running the market-leading Windows operating system, Microsoft was seen to be preventing other companies’ browsers from getting a look in.
Microsoft was told it couldn’t bundle separate software products together and was forced to open up Windows so that other software developers could write programs for it more easily.
But splitting off a piece of software like a browser is easier than carving up the likes of Amazon, Facebook or Google. Warren suggests separating the running of a platform from doing business on that platform. For example, Amazon runs the marketplace on which it sells its own cut-price products, making it harder for others to compete.
Benedict Evans, an analyst at venture capitalist firm Andreessen Horowitz in San Francisco, has .
Evans asks if this thinking applies to things like Apple’s App Store. Should Apple be allowed to sell its own apps? What about supermarkets like Walmart and Sainsbury’s, which have been selling their own-brand products at lower prices for decades – isn’t Amazon just doing the same?
You could argue that Amazon’s unprecedented dominance of online shopping makes things different. For Caffarra, it is as if Walmart or Sainsbury’s had first bought most other retailers before cutting prices, which wouldn’t be allowed in the bricks-and-mortar world.
Say you do want to break these firms up, then. The best way might be to undo mergers, some of which should probably never have been allowed, says Caffarra.
Google dominates online advertising largely because it bought up a string of businesses like DoubleClick. These are now integrated into Google’s business and cutting them out would damage the whole, but it wouldn’t be impossible, says Moore.
Facebook similarly grew to dominate social media by vacuuming up rivals such as Instagram and WhatsApp, both of which helped it gain a foothold on most of the world’s phones.
But again, it would be hard now to disentangle these apps from Facebook’s core business, which is collecting as much data on people as possible. The company even seems to be trying to bolster its defences against a break-up: CEO Mark Zuckerberg recently announced it would be merging the code and data of Instagram and WhatsApp more tightly with the core Facebook app.
Even if you could see a way to do it, breaking up a large company is no quick fix. For regulators, it is a last-ditch option, more a threat than a viable response.
The European Commission, driven by Vestager, has been tougher than most on big tech. But, legally, to consider such a far-reaching course of action would require it to demonstrate that a break-up is the only way to reign in a company’s bad conduct, which wouldn’t be straightforward.
For these reasons, the better option may be to double down on regulation. Caffarra says that calls to break up big tech are more common in the US, where tech firms have been left to do more or less what they want since the Microsoft case 20 years ago. “There is a sense of frustration in many quarters. Nothing is being done and nothing short of breaking them up will work,” she says.
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Total amount Google has been fined under EU competition law
That may be starting to change. Last week, that it expected to be fined as much as $5 billion by the US Federal Trade Commission, which is currently investigating the firm as a result of the Cambridge Analytica data scandal.
Diane Coyle at the University of Cambridge, who co-authored an independent review of digital competition for the UK government, says regulators could use existing powers more. For example, in the UK, Facebook and YouTube could be treated as publishers and held responsible for their content. “They’d have to do a lot to comply,” says Coyle.
The report also argues for new regulations, like making it easier for new businesses to use established platforms so that they aren’t shut out of a market, allowing users to transfer data from one platform to another.
In fairness, Facebook, Google, Microsoft and Twitter are part of an initiative called the , which works towards this aim. But if we want services like search or social networks to become more like email – with different products, such as Gmail or Outlook, all using the same underlying protocols – then there is a long way to go.
Coyle also says regulators need to think differently about acquisitions. Treating Instagram as just a photo-sharing platform, and not a Facebook competitor, was naive, she says.
“Regulation is inevitable,” says Moore. “But we have to be careful how we do it.” He thinks we need a clear sense of the kind of relationship society should have with big tech before we jump in. Choosing the kind of services we want the likes of Amazon, Facebook and Google to provide will determine how we shape the behaviour of the companies through regulation.
For example, if we think – as Warren does – that these tech companies should be more like utilities, then a search engine provider might become as highly regulated as water or electricity firms. Or if we care most about privacy and what happens to our data, then we need specific regulations to enforce transparency or interoperability.
Once we ask these questions, we may find ourselves re-examining the economic model behind these firms. Some say the billions made by Facebook and Google are a result of “surveillance capitalism“, in which services are provided in exchange for personal data.
For Moore, dealing with this economic model is the bigger problem. “If you don’t, then you’re going to get other companies just as dominant in future,” he says.
