Sentiment has shifted on effort against Big Tech
Americans seem quite receptive to plans to break up monopolies
SAN FRANCISCO – A decade ago, when the greed and carelessness of the financial industry came close to destroying the U.S. economy, the overwhelming response by politicians and the public was: Meh. Almost instantly, all was forgiven and forgotten.
Now the tech industry – which, among other impressive innovations, provides the world’s knowledge on demand, lets people freely broadcast their diverse opinions and has made shopping as easy as pushing a button – has made some mistakes of its own. It has abused privacy, squeezed the competition and casually spread hate. And that’s just the beginning of the list.
Google, Facebook, Amazon and Apple might not get away as cleanly as Goldman Sachs and Citigroup. Sen. Elizabeth Warren, D-Mass., who is seeking the Democratic presidential nomination, released proposals this month that would force tech breakups and impose severe restrictions on what remained. Another Democratic presidential candidate, Sen. Amy Klobuchar of Minnesota, covered more briefly some of the same ground, saying, “We have a major monopoly problem.”
At a moment when nearly everything in America seems wildly contentious, antitrust action against tech is getting a sober look. Antitrust is the nuclear bomb of regulatory policy, but the reaction to Warren’s and Klobuchar’s ideas was surprisingly receptive.
“We’ve got to break these guys apart,” Warren said in an interview on “Face the Nation.” The show could name only one critic of her proposal: Howard Schultz, the Starbucks mogul, who is flirting with an independent run for president to the deep disregard of voters.
For decades, a politician who mentioned “antitrust” was essentially arguing for more government oversight, which has been dangerous territory at least since the Ronald Reagan administration. “Antitrust” was relegated to the shelf with “socialism” and “wealth inequality” and “higher taxes for higher incomes.”
It didn’t help that what could be called “maximum antitrust” – when the Justice Department decides a company is abusing its monopoly power and should be broken up – has a mixed history. The government dropped such a case against IBM in 1982 after more than a decade. It settled its case against Microsoft in 2001. Only AT&T, which agreed in 1982 to dissolve itself into a long-distance company and the seven Baby Bells, could be considered an unqualified success from the government’s point of view.
The political landscape is shifting, however, at a speed that dumbfounds even antitrust experts. President Barack Obama thought of right?”
the tech companies in the way they think of themselves: as progressive, smart entrepreneurs who want what’s best for America. His administration declined to pursue Google on antitrust charges and hired from the tech industry for top posts. Top staff members later went to work for the tech industry in top posts, too. It was a cozy relationship.
“Something has definitely changed,” said Geoffrey A. Manne, founder of the International Center for Law and Economics, a think tank in Portland, Ore. “Most voters are very fond of Amazon, Apple, Google and even Facebook. But I think there’s also a growing sense of skepticism about all these companies. The shine has come off.”
Manne, who has been a critic of the antitrust arguments against Google and has received funding from the search giant as well as from some of its competitors, including Comcast and AT&T, eviscerated Warren’s proposal with his colleague Alec Stapp in a recent blog post.
They wrote that the senator’s plan to turn the top companies into heavily regulated “platform utilities” would make them as resistant to improvement as sewer systems or Amtrak.
And yet, Manne conceded in an interview, increased regulation is an idea whose time may have come.
“There is a long history in America – just not a recent one – of using the power of the state to counteract the economic power of private enterprise,” he said. “We may be at that moment again.”
The financial firms were predatory last decade, exploiting weak spots in the mortgage markets in a way that undermined their viability. Google and Facebook, by contrast, offer their services for free, while Amazon built its reputation on selling as cheaply as possible.
That makes it hard to regulate them by the antitrust consensus, which for a couple of decades has held that there is no injury unless consumers suffer by paying higher prices.
Nothing is ever really free, of course, and there has been a dawning realization among some consumers that they are paying for these services with information about themselves. How most users feel about this seems up in the air, as evidenced by a SurveyMonkey poll done for the news site Axios.
The headline finding was that “a growing majority now views our online privacy as a crisis.” But deeper in the survey was the revelation that more than half the respondents said they were unwilling to pay to keep from being tracked by a service they were using. Twenty-one percent said they would pay less than $1 a month, and no more, for the right.
Users, it seems, want it both ways: privacy and free services. This is the contradiction at the heart of the internet.
Daniel Crane, an antitrust expert at the University of Michigan, said Warren’s proposal might be a hard sell to voters. “The median consumer probably feels that she gets lots of free goodies from Big Tech and will worry about what it would mean to go after them,” he said.
But Crane noted that being broken up was the least of the companies’ worries. “A likelier consequence is that the next acquisition they want to make will be rejected,” he said.
That is already happening. One of the anti-competitive complaints about Amazon is that it prohibited its merchants from selling more cheaply elsewhere. That prevented a new platform from underselling Amazon and gaining a competitive edge. Amazon brands as “A for Awesome” children’s wear don’t stand out, the study found. Kaziukenas is scheduled to present his findings Monday at the Prosper Show, an annual meeting of 1,500 Amazon vendors, merchants and consultants in Las Vegas.
Amazon sells more than 550 brands, both its own private-label goods and brands suppliers have agreed to sell exclusively on the site, according to TJI Research in Denver. Most of the Amazon brands have been introduced within the past two years, prompting criticism that the Seattle-based giant has an unfair advantage as the owner of the platform that makes the rules.
In her call to break up tech companies, Warren cited a 2016 Bloomberg story about a laptop stand maker whose sales plummeted after Amazon began selling a very similar product under the AmazonBasics name. Amazon shouldn’t be able to sell products on a marketplace it controls, Warren says.
Amazon has also emerged as a top online battery brand to the detriment of Energizer and Duracell.
AmazonBasics batteries appeared in the top three search positions on Amazon more than half the time for batteryrelated keyword searches, more than Energizer or Duracell, according a September study by Kantar Media. A 2016 study by 1010data estimated that Amazon captured 94 percent of all online battery sales, which enabled it to build its AmazonBasics battery into a category leader.
These are exceptions that demonstrate Amazon’s strength selling generic alternatives in categories where brands don’t command much value, Kaziukenas says. Amazon hasn’t been able to win over consumers with its fashion labels and other categories with more brand loyalty.
Popular direct-to-consumer internet brands like Casper mattresses and Harry’s shaving products have used socialmedia campaigns to promote their products, while Target Corp. uses compelling displays in its physical stores to promote its fashion brands. Amazon just puts house brands on the site without giving shoppers a compelling reason to buy them.
“Selling cheap batteries is very different than building brands,” Kaziukenas says. “Even when Amazon says ‘check out our own brands,’ consumers don’t know what it means and wonder why should they buy this thing they never heard of before.”
“We’ve got to break these guys apart.”Sen. Elizabeth Warren, a Democratic presidential hopeful, speaking about tech companies in an interview on “Face the Nation”