Talk of breaking up 'Big Tech' is misguided, premature

Talk of breaking up 'Big Tech' is misguided, premature
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How fast the tables have turned. Only a few years ago, the major technology platform companies — Alphabet (Google), Amazon, Apple and Facebook — were widely admired.

Now, they are in the dock, accused of limiting competition; chilling startups and the innovation they bring; widening income and wealth inequality; threatening our privacy; enabling foreign actors to poison our elections; and engaging in political bias.

Some urge the government to break up the tech platforms. Others want to regulate them as public utilities. In my new e-book, "Scalpel, Not an Axe,recently published by the Progressive Policy Institute (PPI), I effectively say, “Hold on.” 

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The antitrust laws, as long interpreted by the courts, do not punish companies for successes achieved through innovation and luck, or from benefiting from economies of scale and networks that become more valuable with more users.

There is no credible evidence that any of the tech platforms has engaged in unlawful monopolization that warrants their breakup, such as AT&T’s refusal to interconnect long-distance rivals with its local phone companies (which led to its breakup in the 1980s) or Microsoft’s restrictive practices that entrenched the dominance of its Window’s operating system (which was not punished by breakup).

U.S. proponents of breaking up Google are closely watching the European Commission’s anti-Google actions and are urging U.S. regulators to take a similarly aggressive line. Despite its regulatory zeal, however, the EU is not calling for breaking up Google.

Instead, Google changed its algorithm to ensure it wasn’t favoring its price comparison engine over others. And even if American courts were to rule against Google’s tying of it apps to its Android mobile operating system, they could simply order the company to stop. 

Do these big companies freeze out startups, creating what The Economist has called a “kill zone” around their markets?

That charge is hard to reconcile with the fact that the magazine has also documented the large numbers of companies the platforms have acquired over the years, acting as the “exits” that venture capitalists insist upon as a condition for funding startups in the first place.

Moreover, each the major platforms also hosts or enables advertising for smaller firms, which are far more successful than they would be as islands on the internet.

But even if the market power of the platforms encourages venture capitalists to fund companies in other sectors, that is not necessarily a bad thing. It may accelerate innovations in other markets of greater potential value to the economy and society, such as synthetic biology, robotics and blockchain applications.   

The claim that the “superstar” tech platforms have aggravated income inequality because their high profits raise the share of profits in national income at the expense of labor doesn’t square with the fact that, as PPI Chief Economist Michael Mandel recently documented, labor’s income share in the digital sector is higher than the rest of the private sector — and rising.

In any event, the antitrust laws were never designed to reduce income inequality, except indirectly by punishing firms for conspiring to inflate prices or depress wages, or by abusing their monopoly power.

Each of these activities calls for more vigilance by both federal and state antitrust authorities, for which I make a full-throated case in the book, and for speeding up the resolution of monopolization cases by allowing for automatic (not discretionary) appeals of district court decisions to the Supreme Court.

In addition, there are ways to tighten up merger standards to prevent business combinations that reduce competition, but not by adding non-antitrust factors to the standards, which effectively means there are no standards at all.

The real solutions for inequality lie in other policies: an enhanced earned income tax credit to make work pay better and lifetime financing, up to some limit, for individuals wanting to retrain for more lucrative jobs and better careers. 

The proper response to non-antitrust concern about big tech — abuses or ineffective protection of customer information — is targeted regulation.

At a minimum, federal law should require all firms, inside and outside of tech, to tell people in plain English what data the firms collect about them and to enable them to opt out of having their information shared with third parties.

I am sympathetic to requiring opt-in consent, but the costs and benefits of doing that need further assessment before all companies, or even just the tech platforms, should be held to that standard. 

A reason for my caution is that in an opt-in world, firms collecting data about our preferences and browsing behavior still have the ability to use it for their own purposes, and that raises fears of private sector “Big Brothers” (break them up and we’ll have more such firms).

The Trump administration’s backlash against alleged tech platform bias against conservative information sources — which appear motivated more by political bias of its own than genuine concern about the dangers of data warehouses — should give chills to civil libertarians in either party about the desirability of government supervising all this consistent with the First Amendment. 

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Throughout history, all technologies have shown that they have upsides and downsides:

  • Cars gave us mobility but more car deaths;
  • cable television gave us more choices but have fractured the body politic;
  • the tech platforms have given us new Buck Rogers-like new services yet also contribute to the fracturing of America, and so on.

The best we can do is carefully regulate the downsides, mindful of the dangers of government regulation itself, and the fact that it tends to advantage incumbents over startups and younger companies.

There are no perfect technocratic answers to these challenges; it's the price we pay for living in a free society and wanting a dynamic economy.

Robert Litan is a nonresident senior fellow at The Brookings Institution, a partner at Korein Tillery and formerly a senior antitrust enforcement official at the Department of Justice. This op-ed draws on his recent e-book on antitrust and data policy recently published by the Progressive Policy Institute.