Jun 7, 2019 2:39 PM

Break Up Big Tech? Some Say Not So Fast

Antitrust action alone won’t solve all the problems posed by companies like Facebook, Google, and Amazon.

For years, the US government stood by as big tech companies like Facebook and Google growth hacked and gobbled up competitors on their way to dominance, with barely a mention of “anticompetitive” concerns. But that lax attitude is changing. Word continued to leak this week about possible antitrust investigations by the Justice Department and the Federal Trade Commission, who reportedly divvied up companies like a couple might divide household chores. (The DOJ calls dibs on Google and Apple, while the FTC gets Facebook and Amazon.) House Democrats, meanwhile, are launching an antitrust probe of their own over competition in the tech industry more broadly.

It’s too soon to tell whether any of this activity will lead to meaningful regulation, or what that might actually look like. But for some politicians and activists, the solution to reining in Big Tech is already clear: Amazon, Google, Facebook, and Apple need to be broken up into smaller parts. Senator and Democratic presidential candidate Elizabeth Warren used this week’s news to re-up one of her major campaign proposals. “Google has too much power, and they're using that power to hurt small businesses, stifle innovation, and tilt the playing field against everyone else,” she tweeted. “It's time to fight back. That's why I have a plan to break up Google and the other big tech companies.” Among other things, that plan includes unwinding previous mergers, like Amazon’s acquisition of Whole Foods, Facebook’s purchase of Instagram, and Google’s acquisition of YouTube.

But some experts are skeptical that using antitrust laws to break up Big Tech—at least in the way that has been proposed—would solve the problems lawmakers and citizens are most concerned about, like privacy. The strategy also might not be terribly feasible. “Putting the fix upfront, in proposing a breakup, sort of skips through a lot of really, really key questions,” says Diana Moss, an economist and the president of the American Antitrust Institute, a nonprofit that promotes antitrust enforcement. “That may not actually end up being the best remedy that would restore competition to markets and protect innovators and consumers and workers.”

Breaking up large corporations and unwinding mergers are rare events that are hard for regulators to achieve. “I’ve been in those meetings. It’s difficult to try to figure out what parts of the business need to go with the broken off entity in order for it to be successful,” says Charlotte Slaiman, a former antitrust lawyer at the FTC who now works at the nonprofit Public Knowledge. “Far more remedies have been taken in antitrust cases that do not deal with massive scale breakups,” says Moss. “Those are very heavy lifts for antitrust.” The stakes are also high. If the government loses a case against one of the big tech companies, it could set a weaker precedent for antitrust enforcement in the future.

Proposals that may appear simple, like breaking off Whole Foods from Amazon, would be difficult to argue under current antitrust law, which evaluates mergers based on how they affect prices for consumers. Since Amazon bought Whole Foods, it has actually lowered the cost of some items. Amazon also only controls a small percentage of the overall grocery market in the US. That doesn’t mean the acquisition didn’t negatively impact innovation in the food selling business, but that’s a difficult factor to measure. It would be cumbersome to prove that Amazon prevented, say, another grocery startup from rising up. “It’s a potential competition argument,” says Slaiman. “That’s a very difficult case to bring under current law, that’s probably among the hardest to achieve.”

Google and Facebook declined to comment on the record. Amazon did not respond to a request for comment.

So-called network effects could make splitting off parts of Facebook an ineffective avenue for spurring innovation. Part of the reason Facebook is so powerful is that everyone is already using it, making it hard for small incumbents to compete. Even if Instagram were to be split off, it might simply become the new dominant network, barely changing the status quo. “Breaking up Facebook without anything else probably isn’t going to solve that problem,” says Slaiman. “Because you might have a monopoly just re-emerge through that network effect.”

That doesn’t mean regulators shouldn’t take a hard look at the mergers they have allowed to proceed in the past, says Maurice Stucke, a professor at the University of Tennessee College of Law and a former trial attorney at the DOJ’s antitrust division. He believes the government hasn’t done enough to evaluate the effectiveness of its decisions after the fact. “You’ve basically got a weather person who never goes outside to see whether their prediction is correct,” says Stucke. “The agencies should be far more rigorous in going back and looking at the competitive risks of the mergers they allowed.”

Another issue is that antitrust laws are intended to address competition problems, not some of the other concerning practices of big tech companies, like how they handle consumer data. “We can’t really load up antitrust with stuff it wasn’t designed to do,” says Moss. To deal with issues like privacy, the government will need to use other tools aside from antitrust. “There’s no silver bullet,” says Stucke. “You really need to have a coordination among privacy, consumer protection, and antitrust policies.”

The problem is Congress has been letting tech companies self-regulate for years. There’s currently no modern federal privacy law on the books, and even state laws are only just coming into being now. To comprehensively regulate companies like Google, Facebook, and Amazon, the government needs to pass new laws. The call to break up Big Tech is really “a proxy for breakup and regulate,” says Matt Stoller, a fellow at the Open Markets Institute. Congress might consider, for example, creating a new agency akin to the Federal Communications Commission, specifically to address the practices of digital platforms.

Passing laws will involve overcoming political challenges—as well as intense industry lobbying—but there’s growing support on both sides of the aisle for regulating the world’s most dominant technology platforms. Politicians who tend to disagree about almost everything else, like Nancy Pelosi and Ted Cruz, have both recently agreed that tech giants have amassed too much power (though they disagree about the harms of that power). Companies like Google, Facebook, and Amazon now have enormous influence over what we buy, what information we see, and how we communicate with one another. But merely breaking them up into simple parts won’t address those issues.