Tech giants — the new ‘too big to fail’
US web ‘monopolies’ say scale is essential in a globalised business
● For years, the big internet companies have employed a simple argument to brush off fears that their growing influence and position in our daily lives amount to monopoly.
Because their services are online and provided for free, they say, their dominant market shares cannot be compared to those enjoyed by railway or oil giants of decades past. Unlike tycoons such as John Rockefeller or Andrew Carnegie, the new barons — Mark Zuckerberg, Jeff Bezos and Larry Page — are successful not because there are no alternatives, but merely because consumers choose them over the many alternatives.
Google’s defence of its near-total control over the market for search engines has long been that “competition is just a click away”. Nine in 10 searches may take place on its search engine, but there is nothing stopping consumers from using Bing, Yahoo or a number of smaller competitors.
There are no shortages of social alternatives to Facebook, or online marketplaces to rival Amazon, and nothing stopping internet users leaving; they stay because they like it.
It is a simple argument, which has worked for a long time, especially in the US, where regulators generally focus on whether monopoly positions result in consumer harm. In Europe, where watchdogs look at other factors such as how vibrant and competitive a market is, tech firms have been less successful in evading scrutiny.
But even in the US, it is a line of reasoning that is starting to lose its potency.
Google’s grip on personal data, its subsidisation of the smartphone market through its free Android software and the dominance of its Chrome browser make it the default search engine for billions of people whether they would choose it or not.
The fact that Facebook’s utility comes from the people on it reinforces its dominant position: for there to be a realistic alternative, everybody would have to use it. Competition is still a click away, but structural reasons stop the majority from exercising that right.
Big Tech has become the new too big to fail — or at least, too big to break up
Watchdogs are, belatedly, cottoning on to this fact. Google, Facebook, Amazon and Apple all face multiple competition investigations in the US, which are proceeding apace.
So if your old argument is starting to wear thin, what do you do? There is, as it turns out, an alternative position to take, and it is one that is becoming increasingly common in Silicon Valley: instead of trying to brush off the monopoly tag, wear it with pride.
In recent months, Facebook, Google and Apple have been attempting to make a virtue out of their enormous size or allegedly anticompetitive tactics.
Zuckerberg, especially, has leaned in to this idea. He has said only companies the size of his are capable of rising to the social and global challenges that the internet presents us with. Facebook’s boss has presented big US tech companies as a foil to Chinese internet companies.
In a recent speech in Washington DC, he mentioned China no fewer than six times, saying that Chinese tech companies would export Beijing’s values around the world if US ones were unable to compete with them.
And in an internal meeting, a recording of which was later leaked, he argued that Facebook is only able to make the investments in artificial intelligence and the human moderators needed to combat child abuse, terrorism and election meddling because of its size — and thus that breaking up Facebook, Amazon or Google would make it harder to fight these battles.
Google’s Sundar Pichai has made similar arguments; that “scale does offer many benefits” and saying Google’s size allows it to invest in new technologies without having to worry about immediate profits. Monopoly regulators pose a smaller threat to Apple, but CEO Tim Cook has defended practices many view as anticompetitive, such as the refusal to allow other app download stores on the iPhone, on security and privacy grounds.
The inconvenient thing for those who want to break up big tech, such as Democrat presidential hopeful Elizabeth Warren, is that there is some merit to these arguments, particularly with regards to data. If our personal data is stored with a small number of well-resourced monopolies, rather than many small but competing firms, it is safer.
US regulators in particular, because of their focus on consumer welfare, will have to balance these issues against the potential competitive benefits as they decide whether to crack down on Big Tech.
Today’s crises are about data, fake news and the rise of China. Zuckerberg et al argue that, whether we like it or not, the tech giants’ systemic importance to this debate outweighs any competitive concerns.
Big Tech has become the new too big to fail — or at least, too big to break up.