Big tech to break up : Elisabeth Warren

A prominent Democrat senator, Elizabeth Warren has promised that she would break up the country’s biggest technology companies if she is elected president in 2020.

Background

The Big Four technology companies are Google, Facebook, Amazon and Apple (GAFA). The term refers to companies driving substantial societal change, rather than just the largest tech companies. The term was coined by Eric Schmidt, Phil Simon, and Scott Galloway as driving a large amount of growth in technology. All of them have remarkable franchises that create vistas of wealth creation from ad-related search to online retail, IT platforms, social interaction, entertainment and devices.

As of 2018, the five largest tech companies, including Microsoft are collectively worth more than the entire economy of the United Kingdom. Investors have valued these companies at $3.5 trillion. Facebook's profits were almost $5 billion in the first quarter -- $56 million a day, $2.3 million an hour, $39,000 a minute. Apple makes roughly as much money every day as 2,500 average U.S. households can expect to see in a year.

Elizabeth Ann Warren is an American politician and academic serving as the senior United States Senator from Massachusetts since 2013. Warren was formerly a prominent scholar specialising in bankruptcy law. A noted progressive leader, Warren has focused on consumer protection, economic opportunity, and the social safety net while in the Senate.

Analysis

As the Democratic presidential contest intensifies, Senator Elizabeth Warren promised that if she is elected president in the 2020 elections, she will break up the big four technology companies.

She said: “Today’s big tech companies have too much power — too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else. And in the process, they have hurt small businesses and stifled innovation.”

The process of doing so would be to nominate regulators who would unwind acquisitions such as Facebook’s deals for WhatsApp and Instagram, Amazon’s deals for Whole Foods and Zappos, and Google’s purchases of Waze, Nest and DoubleClick.

She also proposed that these tech companies that offer an online marketplace or exchange for refraining from competing on their own platform. As a result, it would, for instance, forbid Amazon itself from selling on its Amazon Marketplace platform.

According to her, these big tech companies enter towns, cities and states and “bully everyone into doing what they want” and “roll right over” small businesses and startups that are a threat.

Nearly 90% of all internet searches now go through Google. Facebook and Google together account for 58% of all digital ads, which is where most ad money goes these days.

They’re also the first stops for many Americans seeking news (93% receive news online), and Amazon is now the first stop for a third of all-American consumers seeking to buy anything.

Tech companies have recently been under the fire for many instances. Congress held a series of hearings last year looking at the dominance of major tech companies.

Similarly, George Osborne, the former UK chancellor of the Exchequer and now editor of the Evening Standard newspaper, said that “The tech mergers . . . were allowed to happen because no one really understood these markets — and . . . would never have been accepted if they happened now.” This was following the news of Facebook wanting to integrate with Instagram and WhatsApp, which it bought in 2012 and 2014 respectively. According to some analysts, this move could make it harder for regulators to undo those mergers in the future.

Counterpoint

Tech companies are also some of the biggest political donors. It is estimated that Google spent $21 million to lobby in 2018 while Amazon spent $14.2 million and Facebook spent $12.62 million, according to their filings to U.S. Congress.

Carl Szabo, vice president and general counsel for NetChoice said: “Senator Warren is wrong in her assertion that tech markets lack competition. Never before have consumers and workers had more access to goods, services and opportunities online.”

Besides, the president of the US Chamber of Commerce, Tom Donohue also said that breaking up these companies would “take us back to the Stone Age.”

Assessment 

Our assessment is that the call for platform neutrality resonates with most government as its places smaller companies at a disadvantage. We feel that the mergers between large tech companies tend to create behemoths that smother competition and undermine democracy. We believe that these big tech companies have both the economic and political heft to shape rules in their favour. 

Image courtesy: Elizabeth Warren [CC BY 2.0 (https://creativecommons.org/licenses/by/2.0)]