Regulating or breaking up Big Tech: an antitrust explainer

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Four tech juggernauts-Amazon, Apple, Google, and Facebook-are suddenly the target of new scrutiny by the US government. The Federal Trade Commission (FTC), Department of Justice (DOJ), and Congress have all begun to investigate whether these companies have too much power.

Breaking up will be hard to do. It’s going to be a long process and the outcome is far from certain.

Why are Facebook, Amazon, Apple, and Google accused of being monopolies?

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  • Amazon is the world’s largest online store. It also sells hardware like the Echo, runs a computing platform, makes television and movies with Amazon Studios, and owns Whole Foods and Zappos.
    Why it’s a problem: Amazon kills companies by copying their ideas.
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  • Apple hovers around $1 trillion in market value.
    Why it’s a problem: It is currently the defendant in a class-action lawsuit alleging that it drives up prices in its Apple Store.
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  • As the most popular search engine by far, Google controls the flow of information. It also owns businesses in navigation (Maps, Waze), video (YouTube), mobile operating systems (Android), and more.
    Why it’s a problem: Google gives its own businesses special treatment.
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  • Facebook has over 2 billion users and owns Instagram and WhatsApp. Why it’s a problem: It has been blamed for violating user privacy, spreading disinformation, and helping incite genocide.

All this leads to massive conflicts of interest, says Sally Hubbard, director of enforcement strategy at the Open Markets Institute. Google can promote its own products in search results and Amazon can do the same thing in the marketplace. Apple takes a 30% commission from app developers and can prevent them from selling in other places.

Lawyers and activists have been saying for years that the tech companies have too much power. Now politicians like Democratic presidential candidate and senator Elizabeth Warren and Republican senator Josh Hawley are leading the call for change. This new interest is likely pushing regulators to take a closer look.

How did Big Tech get so powerful?

Companies like Google and Amazon collect a lot of data, use that data across services to improve tools and keep growing, and punish competitors. The network effect plays a role, too. If everyone else already uses Facebook, joining a new network seems pointless.

They get a lot of this data by buying up smaller companies. Many experts blame the consumer welfare standard for letting this happen. This core principle of antitrust law says that the most important consideration is that prices don’t go up. Because big tech companies offer many services for free, the consumer welfare standard says that it’s okay for them to keep growing.

Under this view, Google is a search engine while YouTube is a video platform. The companies don’t directly compete, so an acquisition shouldn’t be a problem. “They fail to really consider what’s driving data-driven mergers,” says Maurice Stucke, an antitrust expert at the University of Tennessee at Knoxville and coauthor of Big Data and Competition Policy. “And it’s access to that data, and how that data can help the company obtain or maintain its dominance.”

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That’s changing. Now, some scholars think it’s increasingly important to ask about the “non-price components of competition,” like privacy. (This can be tricky, though, because these components are harder to measure than price.) And they won’t just evaluate whether two companies compete, but whether one buying the other will make it stronger overall.

Haven’t regulators been trying to address this?

Yes, but mostly in Europe. The European Union has brought three cases against Google, related to its ads network, shopping search results, and the company’s requirement that Android phones be loaded with other Google apps. German regulators recently ruled that Facebook can’t automatically track its users on other websites or merge users’ WhatsApp and Instagram data with their Facebook data, but must give them a choice instead.

The main result has been fines-European regulators fined Google $9 billion in the past three years-but fines haven’t changed anything. “I think they’ve come to realize that fines against these tech monopolies are meaningless,” says Gary Reback, an antitrust lawyer with Carr & Ferrell. “It’s just a cost of doing business. They generate so much free cash, there’s no amount you can fine them that makes any difference to their behavior.”

It’s unlikely that European regulators will be able to force American companies to break up their business, adds Reback. But the information gathered in their investigations might speed up the ones in the US.

What would breaking up Big Tech actually look like?

Breakup talk usually focuses on Facebook, Amazon, and Google. In her proposed plan, Elizabeth Warren says Facebook should spin off Instagram and WhatsApp. Amazon should spin off Whole Foods and Zappos, and Google should divest Waze, its smart-home company Nest, and its ad company DoubleClick.

Her plan essentially forces these tech companies to become “platform utilities.” If they’re a platform, they can’t also use the platform. This means that Amazon can’t both run its online marketplace and sell Amazon Basics in the marketplace. Google would have to split up its ads business.

Is breaking up Apple, Amazon, Google, and Facebook the only way to go?

Breaking them up is the nuclear option. “I don’t think you could say that it’s likely in the sense of being more than a 50% chance, but [it’s] a serious question,” says Alec Burnside, a Brussels-based antitrust lawyer at Dechert LLP. “There’s a strong current of opinion which says antitrust needs to get back to its roots and be willing to contemplate that kind of thing. But it goes through a court process with a high burden of proof and that would certainly be a significant battle.”

Experts who don’t favor a breakup say it would be overkill and make our tech tools worse: search would become less functional, for example. Some think that problems could be addressed by making it easier to take data from one platform and use it at another (called ” data portability”), or by forcing different services to work with each other (” data interoperability “), so they can’t lock users in. Facebook and another social network could communicate the same way that people with Yahoo and Gmail accounts can still email each other.

Another tactic is to push for nondiscrimination rules to make sure that Google and Amazon can’t give themselves special treatment. So Amazon can’t recommend its own products first on its website, and Google can’t prioritize its own content instead of, say, Yelp’s.

A third idea comes from internet governance expert Viktor Mayer-Schönberger, who has said a fundamental problem is that these companies have so much data. His solution is to force them to share the data with smaller competitors. Facebook, for instance, could share data with the small social network Mastodon.

Even if the regulators forced companies to spin off businesses, that might not address some key issues. The root of Facebook’s problems, says Hubbard of OMI, is that its business model requires it to keep people on the site and collect data for targeted ads. That gives Facebook an incentive to track its users and spread disinformation. That won’t be solved by taking away Instagram.

There won’t be an easy answer, says Stucke of the University of Tennessee. Figuring out the best way to regulate tech companies is going to involve lots of different areas of law-property, privacy, consumer protection, intellectual property, and more. “Beware of anyone who offers a simple elixir,” he says.