Don’t worry about China when breaking up Facebook
Washington took a big step forward last week in the battle to break up Big Tech. The House Judiciary Committee launched a sweeping antitrust probe of the major players, and key regulatory agencies have sort out jurisdictional questions, preparing to follow suit. It was a hopeful sign that the federal government may at last be prepared to do something to rein in the immense power of social media platforms, and the impacts—seen and as yet unseen—they play in buying, selling, and shaping data affecting all aspects of our lives.
As these arguments gain momentum among thought leaders and economists across the political spectrum, including a co-founder and original investor in Facebook, the company has battled back. I’ve been talking to people on Capitol Hill, and a number of them seem to have bought into Big Tech’s latest scare tactic: China.
Over the past few weeks, such tech company executives as Sheryl Sandberg of Facebook and Eric Schmidt of Alphabet have trotted out a nationalist line to protect their corporate interests. You can’t break us up, the argument goes, because Chinese companies will take over.
They make two arguments. The first claims that increased competition in the United States tech industry would open up space for Chinese companies like Alibaba or Tikor to infiltrate our markets. A level playing field allowing Chinese companies access to U.S. markets could hurt American interests. Secondly, breaking up the U.S. tech giants could imperil America’s place in the race to develop the most advanced artificial intelligence (AI). Because AI depends on vast amounts of data and computing power to “learn,” smaller tech companies in the United States wouldn’t have the same vast datasets or computing resources to compete with large Chinese competitors, the argument goes.
Both of these arguments are red herrings, cynically setting up alternative futures, designed to create a culture of fear and intimidate people into defending the status quo power of Big Tech. We heard similar arguments decades ago from executives at IBM and AT&T facing antitrust scrutiny in the 1980s. In that case, the competition was Japan and its state-supported computer monopoly that threatened to take over U.S. challengers. Federal regulators didn’t buy the arguments then, and they moved to break up IBM and later Microsoft. Neither suit ended in a full break-up, but the litigation caused both companies to open their platforms to encourage more competition.) In the end, Japan’s monopolistic market fell behind, and the United States, with its culture of competition, raced ahead.
There is little reason to believe American consumers will race to use a Chinese-based social network. No Chinese Internet company has ever made any meaningful entrance into the American consumer market, even in earlier periods when competition was more robust. Even if they did, it would encourage the American companies to compete in turn and improve their own service offerings.
“This is a classic straw man argument,” says Facebook co-founder Chris Hughes. “Breaking up Facebook would not hamstring its ability to compete, or allow China to walk all over us. In fact, a more level playing field would drive new and innovative investment. A post-breakup Facebook would still be massively profitable, with plenty of resources to make such investments. And the federal government could respond to any Chinese intervention using the same tools of trade, tariffs and incentives it has used on other fronts.”
Similarly, while it is true that artificial intelligence relies on vast amounts of data and computing power, Big Tech firms that have been broken up would still have plenty of both. In Facebook’s case, hundreds of millions of Americans use Facebook’s core product, Facebook.com, and even in a break-up scenario, it would be worth hundreds of billions of dollars. (Indeed, many see this as a weakness in the break-up arguments.) Facebook’s revenues alone would still be in the tens of billions of dollars, making it one of the largest companies in the world and giving it more than enough resources to power AI research.
From a civil society perspective, it’s concerning that even a post-breakup Facebook would still be a dominant force in the research and development of AI. But the argument that breaking up the company would dramatically impair its impact on AI doesn’t hold water.
The irony of the China defense is that it is a form of admitting the crime. Facebook once claimed that anti-trust wasn’t needed because they don’t share data across their platforms. Now, they are saying they can’t be split up because their business advantage comes precisely from aggregating data across all platforms. Arguing for monopoly protection here is like companies claiming the Foreign Corrupt Practices Act undermines the ability of U.S. companies to compete. Reasonable regulation can protect consumers while allowing healthy competition to flourish.
The “beware China” arguments serve tech CEOs who want to see no government oversight of their platforms. They seem to believe national security arguments are more likely to scare legislators into action than others. The logical conclusions of these arguments is a “too big to fail” designation. If we accept this, we resign ourselves to a small set of companies with enormous reach and power, effectively choosing national “winners” through our inaction. This is a false choice. We don’t have to choose between the rise of a red Internet or the status quo: we can choose well-regulated competition that serves American consumers and spurs economic growth.
We should reinforce the institutions charged with protecting what makes America’s economy so special: the innovation and dynamism that emerges when markets are competitive and fair. If we allow ourselves to continue to exist with a small set of industrial giants in Big Tech, we’ll be undermining our long-term growth and putting our country’s economic and national security at risk.
Tom Perriello, who formerly represented Virginia’s 5th District in the U.S. House, is executive director of Open Society-U.S. at the Open Society Foundations.