Big tech’s $5 tril­lion reck­on­ing has to start some­where

Business World - - Opinion - By Tae Kim

IT’s fi­nally here. Af­ter an in­ves­ti­ga­tion that lasted more than a year, a US House an­titrust sub­com­mit­tee has come up with a ro­bust game plan to rein in the big­gest tech gi­ants. In a report is­sued Tues­day, the panel ac­cused Ama­zon.com, Inc., Ap­ple, Inc., Face­book, Inc., and Google par­ent Al­pha­bet, Inc. — whose col­lec­tive mar­ket value is more than $5 tril­lion — of abus­ing the power of their plat­forms to cut off com­peti­tors and ex­tend their dom­i­nance. It calls for a struc­tural breakup of their busi­nesses. I can’t ar­gue with the logic, es­pe­cially when it comes to Ama­zon.

“These firms have too much power, and that power must be reined in and sub­ject to ap­pro­pri­ate over­sight and en­force­ment. Our econ­omy and democ­racy are at stake,” the nearly 450-page fi­nal report said. “Our laws must be up­dated to en­sure that our econ­omy re­mains vi­brant and open in the dig­i­tal age.”

Each of the com­pany’s an­ti­com­pet­i­tive prac­tices were pre­sented in ex­cru­ci­at­ing de­tail in the doc­u­ment. Face­book, for in­stance, was ac­cused of main­tain­ing its mo­nop­oly power among so­cial net­works by us­ing its data advantage to sti­fle and iden­tify po­ten­tial com­peti­tors and then “ac­quire, copy, or kill these firms.” Google was said to have used its dom­i­nance in search and on­line ad­ver­tis­ing to bol­ster its own ver­ti­cal of­fer­ings and cre­ate an “ecosys­tem of in­ter­lock­ing” mo­nop­o­lies. Fur­ther, the in­ter­net be­he­moth al­legedly used third­party app us­age data from its An­droid op­er­at­ing sys­tem to in­form the cre­ation of its own apps. And Ap­ple was stated to have “sig­nif­i­cant and durable mar­ket power” with its iOS mo­bile op­er­at­ing sys­tem, ex­ert­ing a mo­nop­oly- type hold with its App Store, the panel said.

Out of the group, though, Ama­zon seems to have en­gaged in the most egre­gious an­ti­com­pet­i­tive be­hav­ior, es­pe­cially in re­gards to third- party sell­ers on its mar­ket­place plat­form. Ear­lier this year, the Wall Street Jour­nal re­ported Ama­zon’s em­ploy­ees used these ven­dors’ data to in­form the de­vel­op­ment of its own prod­ucts. The com­pany had pre­vi­ously vowed it would not use in­di­vid­ual seller data to launch its pri­vate- la­bel of­fer­ings, but the House in­ves­ti­ga­tion con­firmed through sev­eral in­ter­views with for­mer em­ploy­ees and cur­rent sell­ers that Ama­zon had mis­used seller data and “rou­tinely bul­lies and mis­treats” them. And while Ama­zon pub­licly called third­party sell­ers “part­ners,” the in­ves­ti­ga­tion showed that be­hind closed doors, it re­ferred to them as “in­ter­nal com­peti­tors.” This is not great news for the nearly 2 mil­lion small- and medi­um­sized busi­nesses that sell on Ama­zon’s plat­form, roughly 40% of which rely on the com­pany’s mar­ket­place as their sole source of in­come.

So, what are some of the House panel’s rec­om­men­da­tions to counter Big Tech’s abu­sive prac­tices and do they make sense?

First, the sub­com­mit­tee is call­ing for the struc­tural sep­a­ra­tion of business lines by pro­hibit­ing any dom­i­nant plat­form from op­er­at­ing in the same mar­ket as other com­peti­tors de­pen­dent on the same plat­form. Ac­cord­ingly, it asks for leg­is­la­tion to re­quire ei­ther di­vest­ment or func­tional sep­a­ra­tion in­side the com­pa­nies. This makes sense. At least for Ama­zon, given its poor pat­tern of be­hav­ior, Congress should con­sider forc­ing the com­pany to ei­ther give up its pri­vate- la­bel business or sep­a­rate it from the com­pany. For the other tech gi­ants, greater over­sight on in­ter­nal or­ga­ni­za­tional sep­a­ra­tions among their var­i­ous plat­forms may be enough.

Sec­ond, the panel wants to im­ple­ment rules that will pre­vent pref­er­en­tial or dis­crim­i­na­tory treat­ment on the dom­i­nant plat­forms. Here Google should def­i­nitely come un­der the purview of these new reg­u­la­tions, ow­ing to its dom­i­nant search en­gine and prac­tice of rank­ing its own ser­vices higher in search re­sults, even if its own of­fer­ings aren’t as good as the com­pe­ti­tion.

Not all the report’s rec­om­men­da­tions are as fea­si­ble. The panel calls for re­stric­tions on the use of “su­pe­rior bar­gain­ing power” by the tech­nol­ogy com­pa­nies in dic­tat­ing terms and ne­go­ti­at­ing agree­ments. This seems overly am­bi­tious and dif­fi­cult to en­force.

But over­all, the steps and ideas pre­sented are a good place to start. Sure, many of the most ag­gres­sive reme­dies will be dif­fi­cult to get passed in a par­ti­san Congress, but with the Novem­ber elec­tion, who knows what the makeup will be next year. And given all the de­tails and be­hav­iors out­lined in the report, Big Tech frankly de­serves a bit of a reck­on­ing.

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