Elizabeth Warren vs. Big Tech: What could go wrong?

Warren’s proposal to break up Amazon, Google, et al., may sound nice, but would it really fix anything?
Elizabeth Warren
Elizabeth Warren(Edward KimmelCC BY-SA 2.0)

2020 presidential candidate Elizabeth Warren made headlines recently when she suggested that it’s time to break up big technology firms like Amazon, Google, and Facebook — as well as Apple — because they have “too much power over our economy, our society, and our democracy.” To support her proposal, Warren references the anti-trust lawsuit against Microsoft in 1990s, which Warren argues helped clear a path for upstarts like Google and Facebook to emerge and achieve the dominance they enjoy today.

Now maybe, at first blush, you think Warren’s idea is a good one because you disagree with what those companies do when it comes to privacy and security. Maybe you think they really are too big and stifle innovation. Or maybe you have some different reasons altogether. (Lord knows I have plenty of gripes with them, particularly Facebook and its numerous privacy snafus.)

But something about Warren’s proposal felt off to me the minute I heard it. And two recent articles have helped me put a finger on why Warren’s proposal may make for good headlines that appeal to her base, but at the same time, contains a certain misunderstanding with how big technology giants like Amazon et al. came about and how they operate — a misunderstanding that could easily make things worse. (Both articles are pretty long and detailed, so pour yourself a beverage and find a comfortable seat before you start reading.)

The first is from TechDirt’s Mike Masnick who agrees that there’s plenty about Amazon et al. that’s concerning. However, he also points out where Warren just gets it wrong, starting with her use of the Microsoft lawsuit to bolster her claims:

First, Microsoft was clearly engaged in anti-competitive practices that were designed to restrict competition and harm consumers. There was clear evidence of the company proactively seeking to undermine competitors. There is (to date!) little such evidence of the same thing with the big internet companies. It is entirely possible that such evidence will eventually be found, and if that’s the case, then it’s reasonable to punish the companies for such practices. But, to date, all of the examples people cite as “evidence” of anti-competitive practices by the big internet companies really looks like reasonable steps to improve consumer welfare with their products (i.e., the opposite of what Microsoft was doing in the 90s.)

Second, I know some may disagree, but I find it difficult to believe that the government’s antitrust case against Microsoft truly “helped clear a path” for Google and Facebook. After all, that antitrust case fizzled with the DOJ, despite “winning” the case, eventually getting basically no real concessions from Microsoft at all. The argument that some will make was that merely being involved in the antitrust case helped clear the path by (a) distracting Microsoft and forcing it to spend a bunch of resources on fighting the DOJ and (b) by making the company more hesitant to continue its historical practices, but I’m not sure there’s much evidence to support either of those claims. Microsoft fell behind Google and Facebook because the company was structurally oblivious to the power of the internet, and when it finally realized the internet was important, really couldn’t make the necessary shifts to be a truly internet native company. Yes, it took over the browser market, temporarily, but was easily beaten back when better browsers came on the market.

Masnick also points out that Warren’s proposal, which would increase regulation of massive tech firms (i.e., those with a global annual revenue of $25 billion or more) to ensure that they “meet a standard of fair, reasonable, and nondiscriminatory dealing with users,” is a legal snafu just waiting to happen:

While “fair, reasonable, and nondiscriminatory dealing with users” sounds nice — and is used in other things such as FRAND patent licensing — it’s not entirely clear what it truly means in these situations. Everyone likes the words “fair,” “reasonable” and “nondiscriminatory,” but in the context of users on a platform, does it mean that internet platforms can no longer ban trolls for harassment? Because right now there are a lot of trollish people who are insisting that being banned from Facebook, Twitter or YouTube is unfair, unreasonable and discriminatory. Indeed, this seems like a huge gift to the trolls and grifters who pretend to be “conservative” and then whine when platforms cut them off.

In other words, “This is a recipe for insane amounts of litigation — often vexatious litigation, just seeking to ding a company for being unfair’ in its choices.”

The second article is by Ben Thompson (via his excellent Stratechery newsletter), and though his overlaps a lot with Masnick’s — such as critiquing Warren’s use of the Microsoft lawsuit — he spends more time addressing the issues surrounding the senator’s call to break up Apple. Specifically, the underlying assumption that Apple’s behavior has been harmful to consumers because the App Store stifles competition.

Thompson points out that Warren’s claims aren’t without merit — Apple has certainly done some questionable stuff — but her proposal goes too far in the other direction:

At the same time, do consumers not matter at all here? Is Senator Warren seriously proposing that smartphone be sold with no apps at all? Was Apple breaking the law when they shipped the first iPhone with only first-party apps? At what point did delivering an acceptable consumer experience out-of-the-box cross the line into abusing a dominant position? This argument may make sense in theory but it makes zero sense in reality.

What is even more striking, though, is that the App Store does have a massive antitrust problem: it is not Apple unfairly competing with app developers, it is Apple unfairly imposing massive complexity and extracting 30% of revenue with its contractual requirement, enforced by App Review, that developers use Apple’s payment mechanism. I wrote about this extensively last year in Antitrust, the App Store, and Apple (also see this follow-up); I think there is a case Apple’s policies would be found anticompetitive under a Quick Look review, and may even be a per se antitrust tying violation.

The important takeaway for this Article, though, is the degree to which Senator Warren missed the point: there is significant consumer benefit both to having preinstalled apps and also to Apple controlling the installation of apps. There is a big benefit to suppliers (app developers) as well: the app market on PCs died in large part due to security concerns, which Apple obviated with the App Store to the tremendous benefit of every participant in the ecosystem. Senator Warren’s proposal would make the App Store worse for everyone.

At the end of his article, Thompson really gets to the crux of why this all matters:

Let me reiterate a point I have made twice now: I appreciate Senator Warren raising these issues; they are indeed critical not only for the world today, but also the world we wish to create in the future. That, though, only increases the importance of getting things right: the history, the fundamental problem, and the nature of tech. Only then can we start to grope for solutions that actually make the situation better rather than worse.

For all of its ubiquity, technology is complicated and hard to understand — there’s no getting around that. What’s more, that very same ubiquity makes it difficult to fully understand the extent of technology’s reach as well as the effects, desired or otherwise, of trying to rein it in somehow.

Just to clarify, I do think that big tech firms have a lot to answer for, if only because of the massive influence — for good or ill — that they now enjoy in our society. On its surface, Warren’s proposal certainly feels good: who doesn’t want to take a hammer to Facebook after reading about yet another privacy issue? But as it stands, I’m skeptical that it’ll do much good in the long run, or really do anything to truly hold tech firms to account in any meaningful or substantial way.

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