Many Americans think Big Tech and Silicon Valley have too much power and need to be reigned in. Six weeks ago, it was hard to believe Washington had the political will to do much about that. Facebook had just said it would take a charge of up to $5 billion for an expected Federal Trade Commission fine related to its role in the Cambridge Analytica scandal.
The reaction: Facebook’s stock stock jumped 6 percent to its highest price in nine months. The potential fine seemed manageable; Facebook has reported more than $5 billion in profit in some quarters. Investors concluded that regulators would, at most, give the company a hard slap on the wrist.
Americans are used to Washington punting on technology issues. The Trump administration and half of Congress are Republicans, who typically favor more lax corporate oversight. When Democrats were last in the White House, during the Obama administration, they viewed Silicon Valley with reverence. The administration hired many tech executives into top posts; it unapologetically viewed Silicon Valley as the new engine of the global economy. In 2013, the FTC voted unanimously to settle an antitrust investigation of Google without bringing charges, despite a report by FTC staffers that found Google engaged “in tactics that resulted in harm to many vertical competitors.”
European regulators have fined Google more than $9 billion over the past three years for antitrust violations. But antitrust probes of tech companies in the US are hobbled by the prevailing view of competition law, which requires showing that consumers were harmed. That’s hard to quantify when tech companies offer free services in exchange for personal data, and then use that data to make their products better and faster. The US hasn’t brought a big antitrust suit against a tech company since it took on Microsoft 20 years ago.
In the past week, however, there are signs that Washington’s deference to Big Tech may be changing. On Thursday, senator and presidential candidate Elizabeth Warren put up a “Breakup Big Tech” billboard near a commuter train station in San Francisco. Late Friday, the Wall Street Journal reported that the Justice Department is preparing an antitrust investigation into Google’s business practices. On Sunday, the Washington Post reported that the FTC might be readying a look into potential antitrust violations by Amazon. And the big fine that Facebook warned about has not yet been finalized.
Google and Amazon declined to comment.
If these developments don’t make Silicon Valley uneasy, they should. Washington appears to be moving beyond holding hearings, which tend to generate more heat than light. Both political parties may in fact be gearing up to make Big Tech the bogeyman in the 2020 presidential election.
Democrats and Republicans agree on little these days; unease with tech is one of those things. The parties tend to dislike Big Tech for different reasons, and propose different solutions. Republicans say the companies are funded and staffed by liberals who are biased against them and censor them. Democrats say Big Tech is too powerful and hurting competition, consumers, and society. Silicon Valley’s nightmare is an election in which the parties compete over who can be tougher on tech,
Indeed, immediately after the reports that Justice might be about to investigate Google, Warren issued a statement saying that Google and other Big Tech companies “have too much power and they’re using that power to hurt small businesses, stifle innovation, and tilt the playing field against everyone else. It’s time to fight back.”
Still, these incipient signs of a tougher line on antitrust are a long way from formal charges, not to mention serious constraints on tech’s conduct. The newfound fervor to police Big Tech is up against two big obstacles: corporate influence on the conversation around antitrust and a decades-long laissez-faire legal framework around antitrust.
That interpretation pushed the idea that antitrust intervention is only justified if there’s harm to consumers, measured primarily by rising prices. For instance, a 1993 Supreme Court decision constricted the law around predatory pricing, making it harder to demonstrate harm in data-driven digital markets, where firms may recoup costs in other ways. Companies like Google and Facebook, which offer consumers free services in exchange for their data, have, naturally, benefitted from this approach.
In recent years, some critics like antitrust scholar Lina Khan and populist agitators like the Open Markets Institute have raised public awareness about this so-called consumer welfare standard—offering citizens some insight into why enforcers have viewed Silicon Valley differently than Standard Oil. But that doesn’t change the fact that case law is on Big Tech’s side.
Dominant tech platforms pose other challenges for antitrust enforcers as well. Take mergers and acquisitions. Enforcers are trained to closely scrutinize mergers involving relatively big companies, such as AT&T and Time Warner. They have less of a record examining deals when take giants buy emerging, but still small, companies, such as Facebook’s acquisitions of Instagram and WhatsApp.
“Enforcers may have to learn to think more as venture capitalists do and understand their analytics in order to better identify harms,” wrote economist Fiona Scott Morton in a paper about digital platforms last month. The paper also urged more scrutiny of a strategy by some tech companies to encourage others to rely on a service, and then use their dominance to shut out rivals. One of the EU’s complaints against Google charges that the company did just that with its Android mobile operating system. Last week, Google’s competitors told Bloomberg they had similar concerns around Chrome, Google’s web browser.