It’s been half a decade since Amazon announced its drone delivery service on 60 Minutes, during a segment so giddy it could have been retitled Tech Does the Darndest Things. That same year CNN marveled at Facebook’s plan to connect the entire world to the internet and Time wondered if Google might one day cure death. 2013 was likely the apex of heady optimism about the boundless opportunities of technology.
Five years later, the mood has shifted. Industry watchers are less concerned with tech companies’ science fiction fantasies than their potentially illegal activity. A 60 Minutes segment in May explored whether Google is abusing monopoly power with its ubiquitous search engine. Columns calling for the breakup of Google, Facebook, or Amazon are now common in national media outlets. More importantly, lawmakers on both sides of the aisle are agitating for regulatory action. Democratic Rep. Keith Ellison called on the Federal Trade Commission last week to investigate Google’s businesses practices, while Republican Sen. Lindsey Graham asked Mark Zuckerberg whether Facebook was a monopoly at a congressional hearing in April.
Despite growing anxiety about Silicon Valley’s outsize influence, “big is bad” doesn’t hold up as an argument for antitrust enforcement. “There’s no legal basis for breaking a company up just because of its size,” says Daniel Rubinfeld, a law professor at the University of California, Berkeley, who served as chief economist for the Justice Department’s antitrust division during its 1998 lawsuit against Microsoft. “[The Sherman Antitrust Act] doesn’t allow one to just break you up because you’re big and you’re powerful.”
Even if the world’s most powerful companies have amassed monopoly power in certain sectors, regulators must prove that they exert that power in a way that harms consumers or stifles competition. It’s an especially tricky argument to make against firms that offer free or cheap services via the internet. The tech giants, which have largely been allowed to grow unfettered since the Microsoft lawsuit, often argue that a competing option is just a click away.
But that reasoning looks increasingly specious in an era when Google functions as a verb, Facebook owns two of the biggest social networks, and Amazon is powering a huge portion of the internet. “All these platform companies are making every effort to keep us from switching,” says Harry First, a law professor at New York University. “It may be a click away, but apparently people hate to click.”
After talking to some antitrust experts and surveying the current political rumblings, we made this breakdown of the tech giants’ current legal troubles and envisioned a world in which they really do get broken up. It may not be likely, but building a series of companies collectively worth trillions of dollars out of West Coast garages and Ivy League dorm rooms wasn’t too likely in the first place.
Where They Dominate: Google’s namesake search engine has no peer, with about 90 percent market share globally and more than 85 percent in the United States. Critics argue that Google favors its own content in search results over competitors’—when you look for a nearby restaurant, for example, you’re going to see a lot of Google-curated options in a prominent information box before you get to the Yelp links below. Some antitrust experts argue this favoritism allows Google to leverage its search dominance to boost its other lines of business, such as its Shopping and Maps platforms. Using monopoly power in one field to bulldoze your way into another is a classic antitrust no-no.
Who’s After Them: As Google’s search market share has grown, so has the target on its back. Yelp and Microsoft have been the most vocal corporate critics of the company’s dominance (Yelp CEO Jeremy Stoppelman was the stand-in for aggrieved startups everywhere in that 60 Minutes segment). The Federal Trade Commission already investigated Google early in the decade but decided not to bring antitrust charges. Now, with a new set of commissioners in place, lawmakers are advocating that the organization take a second look. In Europe, Google already has been fined $2.7 billion for violating antitrust regulations, with more cases still pending.
Is Bigger Better? Google argues that search has evolved from the 10-blue-links format of yesteryear into a product that more readily surfaces the exact results people are looking for. That’s a better experience for consumers.
The Surgery: Google’s search engine could be spun off into a separate company from the rest of its services, lowering its incentive to put Google-owned properties front and center in search results.
Where They Dominate: Tabulating Facebook’s market share is tricky. On one hand, the company can rattle off a long list of competitors—including, uh, Flickr and Dailymotion—it claims are keeping it up at night. On the other hand, there is really no other website that combines real-life social connections with virtual discussion the way Facebook does. The company has been savvy about keeping it that way by acquiring nascent competitors and copying features in other apps. Everyone knows Facebook acquired Instagram and regularly rips off Snapchat, but fewer people heard about the acquisition of teen polling app tbh or the intense effort to mimic the functionality of the video chat app Houseparty. Facebook even owns a data-security app called Onavo that it uses to track internet users’ habits as a kind of market research on potential threats. The aggressiveness with which the company neutralizes competitors—and its reckless handling of user data—could make it a target of antitrust scrutiny.
Who’s After Them: In late May, a coalition of activist and watchdog groups launched a grassroots campaign pressuring the FTC to spin off Instagram, WhatsApp, and Messenger from the core Facebook social network. “Those acquisitions were insufficiently scrutinized,” says Lina Khan, the director of legal policy at the Open Markets Institute, one of the organizations behind the campaign. “They helped Facebook amass greater market power. Those divestments would create more competition in a market that right now suffers from a lack of competition.”
Is Bigger Better? Facebook argues that it’s not a monopoly because the average American uses eight communication apps per day. The company also says its size helps it block negative content from spreading further, since a person sharing spam or graphic content on Facebook can simultaneously be kicked off Messenger, WhatsApp, and Instagram.
The Surgery: A Facebook breakup would be relatively straightforward since Instagram and WhatsApp retain independent staffs and leadership structures.
Amazon
Where They Dominate: Amazon’s initial line of business—selling books online—is also its most dominant market. The company commands 50 percent of all book sales in the United States and 75 percent of all e-book sales. Amazon has used its dominance in books to pressure publishers in the past, preventing preorders and purposely delaying deliveries for the book publisher Hachette during a pricing dispute in 2014. But long term, antitrust watchers are more concerned about Amazon’s domination of cloud computing, where its Web Services product has had more than 60 percent of the market share. “Some of the parties that use [Amazon Web Services] are concerned that Amazon might use that service to harm them in the businesses in which Amazon and they compete,” First says. “If you were Netflix, you might be concerned that you now have all your data on AWS, and lo and behold, you’re competing against Amazon in digital entertainment.”
Who’s After Them: Donald Trump, who seems to have a personal beef with Jeff Bezos, has floated the idea of siccing the Justice Department on Amazon multiple times, but he’s unlikely to follow through on the threat. The company might be in more trouble if Democrats manage to regain control of Congress and implement a trust-busting agenda.
Is Bigger Better? Amazon is quick to point out that its market share in overall retail sales remains relatively small, at 4 percent (Walmart still dwarfs the online retailer in revenue). The fact that Amazon’s strategy is largely based on undercutting competitors’ prices also makes it a tough antitrust target—the biggest antitrust action in e-books came not against Amazon, but against Apple and book publishers for conspiring to increase book prices. At a recent shareholder meeting, Bezos said he believes the company will pass any increased government scrutiny “with flying colors.”
The Surgery: Amazon Web Services could feasibly be spun off from the retail arm—it’s already listed as a separate business line in the company’s quarterly earnings reports. There’s also an emerging argument that Amazon Marketplace, where third-party sellers conduct about half of all Amazon retail transactions, should be split off from Amazon’s internal storefront because of the power Amazon exerts over its merchants. “Amazon is both serving as a critical platform for all these businesses but simultaneously in competition with [them],” Khan says.
Apple
Where They Dominate: Some assume the iPhone is a monopoly—in fact, it’s Android that controls most smartphones and has faced antitrust scrutiny in Europe. Apple has gotten in more trouble for its efforts to control pricing in its entertainment services. There was the e-books lawsuit mentioned earlier and an FTC investigation of whether the App Store’s pricing policies discriminated against Apple Music competitors like Spotify by forcing them to pay the 30 percent “Apple tax” for placement in the App Store (the FTC has not filed a suit concerning the claims).
Who’s After Them: Spotify has lobbied the European Union to take action against Apple’s App Store practices. A class-action lawsuit in the U.S. makes similar demands. But despite being the most valuable company in the U.S., Apple’s emphasis on a tightly controlled, closed ecosystem means it’s less susceptible to broad claims of anticompetitive behavior that would prompt a major breakup.
Is Bigger Better? On the music front, Apple argued that Spotify was simply trying to skirt rules that it applied to all developers. In the e-books case, the company argued that it was actually helping to upset Amazon’s monopoly in the market by introducing a viable competitor, even if its prices were higher.
The Surgery: Apple’s acquisition of the song-identifying app Shazam has been delayed due to a European investigation. Regulators are increasingly considering data a resource that companies can abuse in anticompetitive ways—the data Shazam has on users’ listening habits from competing music services might give Apple an unfair advantage against Spotify and others. The fact that a fairly common acquisition of a midlevel startup is now subject to antitrust scrutiny indicates that the rules of engagement between tech giants, their smaller competitors, and the agencies that govern both of them are changing fast.
