Elizabeth Warren Drags Big Tech Into the Populist Crosshairs
The Massachusetts senator’s proposal to break up tech giants like Google, Amazon, and Facebook has not only reset the terms of a nebulous debate about Silicon Valley’s power—it’s turned the battle against Big Tech into a presidential campaign issueElizabeth Warren Drags Big Tech Into the Populist Crosshairs
The Massachusetts senator’s proposal to break up tech giants like Google, Amazon, and Facebook has not only reset the terms of a nebulous debate about Silicon Valley’s power—it’s turned the battle against Big Tech into a presidential campaign issue
Last week a tech CEO and a presidential candidate presented two divergent paths for an industry under fire. On Wednesday, Mark Zuckerberg announced plans to refocus Facebook on private messaging rather than public sharing, a sweeping overhaul of the philosophy that propelled the platform to a user base of more than 2 billion. Key to his plan is more closely tying the core Facebook experience to the company’s two highest-profile acquisitions, WhatsApp and Instagram, so that messaging among the three services is effortless. “If we can implement this, we can give people more choice to use their preferred service to securely reach the people they want,” Zuckerberg wrote in a blog post.
You can be an umpire—a platform—or you can own teams. That’s fine. But you can’t be an umpire and own one of the teams that’s in the game.Elizabeth Warren at South by Southwest
On Friday, Senator Elizabeth Warren (D-Massachusetts) announced a proposal to force Facebook to spin off WhatsApp and Instagram into independent companies. The plan is only one part of her aggressive gambit to dismantle Facebook, Google, and Amazon if she is elected president in 2020. (She threw Apple into the mix over the weekend.) Warren calls for separating Google Search from the rest of Google, splitting Amazon’s third-party marketplace from its division of in-house retail brands, and rolling back many of the major tech acquisitions this decade. “We need to stop this generation of big tech companies from throwing around their political power to shape the rules in their favor and throwing around their economic power to snuff out or buy up every potential competitor,” she wrote in her own post, entitled “Here’s how we can break up Big Tech.”
The tech giants want to create a seamlessly integrated world in which they organize every aspect of our digital lives, largely collecting consumer data rather than dollars as payment. Warren and a growing faction of antitrust reformers want to break up these companies in the hope that new competitors can create viable alternatives with different corporate practices and less rapacious business models. Over the next few years, Americans will have to decide which of these two visions they prefer. By turning the battle against Big Tech into a campaign issue, Warren is betting that popular opinion will be on her side.
Under Warren’s proposed legislation, any company that generates $25 billion or more in annual revenue would be designated a “platform utility” and forced to spin off any businesses it owns that compete on a marketplace it also owns. Google would have to separate its search engine from its comparison shopping service and its local reviews platform, which vie for space in search results with sites like Yelp. Amazon wouldn’t be able to sell its in-house brands on the same platform where it recruits other businesses to sell similar products. “It’s a little like baseball,” Warren said at a South by Southwest panel Saturday. “You can be an umpire—a platform—or you can own teams. That’s fine. But you can’t be an umpire and own one of the teams that’s in the game.”
Warren also wants to roll back many of the headline-grabbing acquisitions the tech giants have made in recent years. In addition to breaking off WhatsApp and Instagram from Facebook, she’d like to nix Amazon’s purchase of Whole Foods and Google’s tie-ups with Waze and Nest. Federal law enforces no statute of limitations on mergers, so the Federal Trade Commission could theoretically sue to undo any of these deals at any time.
The proposal has been met with silence by the tech giants, but with some level of alarm from antitrust traditionalists, including those who pursued the breakup of Microsoft within the U.S. Department of Justice 20 years ago. According to this contingent, forcing firms that grew into behemoths to break apart could introduce inefficiencies to the economy that could harm both the companies and their customers; Amazon’s low prices and Google’s abundant free services are both benefits of being big. Unwinding mergers—a process lawyers call “unscrambling the eggs”—can be tricky, depending on how deeply an acquired company has been integrated into the corporate mothership. And punishing tech companies for making lots of money without investigating their specific anticompetitive behavior strikes some as a wrongheaded approach that could stifle innovation. “It wouldn’t really make a difference whether they had abused their power or not,” says Stephen Houck, who served as the antitrust bureau chief in the New York Attorney General’s Office during the Microsoft trial. “The fact that they had power—[Warren] would break up the companies. I’m not sure that would really benefit consumers in the end.” (Houck later represented Google during an antitrust investigation by the FTC.)
Indeed, Warren’s move is not an attack on only the tech giants, but on the way that antitrust law has been carried out over the last several decades. “This is a populist attack on bigness,” says Doug Melamed, who was the acting assistant attorney general in the Justice Department’s Antitrust Division during the Microsoft trial. “It is lumping together stories that as an economic and factual matter are very different.”
Warren would hardly shy away from the populist moniker, which is central to her progressive brand. (Her response to economic hand-wringing at SXSW: “The monopolists will make fewer monopoly profits. Boo-hoo.”) Though in her post she mentions the Microsoft case and how it helped open a competitive lane for Google, her go-to historical reference when laying out her proposal is the railroad monopolies of the late 19th century, which worked out self-serving deals with companies like Standard Oil, though they were supposed to act as neutral carriers. As to the specter of lost innovation, she points to the decline in new businesses in recent years as a counterargument to the idea that a scrappy startup will inevitably topple the incumbents. Despite the flurry of “Uber for X” apps that captured media attention early in the decade, entrepreneurship is in a generational decline. The share of U.S. companies less than a year old fell from 15 percent in 1980 to about 8 percent in 2015.
Warren’s proposal is influenced by the work of younger legal scholars like Lina Khan, whose paper decrying Amazon’s platform power as anticompetitive has helped spark a broad pushback against prevailing antitrust theory during the past two years. It’s also easy to see the influence of Europe’s more strident crackdowns on Big Tech. Warren’s provisions to fine companies up to 5 percent of annual revenue for breaking the platform utility law echo the tough regulations across the pond.
If you’re not gonna enforce the [current antitrust law] … we’re not just gonna sit here and take it. Something has to happen.Gary Reback, longtime Google critic
More than anything else, though, Warren is attempting to leverage the growing dissatisfaction with the U.S.’s most powerful corporations into a political movement. By naming specific companies and framing the issue as one that can be solved by congressional vote, she’s inviting Americans to take part in a debate over bigness that has long been left to D.C. lawyers and economists. While some warn that politicizing antitrust enforcement would undermine its reliability, others find the idea particularly appealing when a handful of corporations are wielding lots of political power themselves. Whether that power is accrued by accident, like Facebook’s role in influencing elections, or on purpose, like Amazon’s HQ2 sweepstakes, it brings to mind the “kingly prerogative” that Congress was trying to eliminate in 1890 when it passed the Sherman Antitrust Act. “If you’re not gonna enforce the [current antitrust law] … we’re not just gonna sit here and take it,” says Gary Reback, a longtime critic of Google who represented Netscape in the runup to the Microsoft antitrust case. “Something has to happen. The kind of thing that might happen is a throwback to the antitrust of the old days.”
Warren will face an uphill battle. Google and Amazon continue to score highly on customer satisfaction surveys; while Facebook is hardly beloved, it remains entrenched in many people’s lives. Some of the companies she wants to split apart, like Amazon and Whole Foods, haven’t achieved monopoly market share in the sectors in which they compete. And unlike in the Microsoft saga of the ’90s, the current crusade against Big Tech lacks a Netscape: a popular underdog startup that’s being demonstrably harmed by a big, bad corporate giant. “[Netscape] was in some respects a brand-new technology,” Reback says. “It made it easier to have something specific to rally around as opposed to having to just push back against a big monopolist.”
Whatever becomes of Warren’s proposal, it’s valuable for bringing a specific, accountable plan into the nebulous debate about how to deal with companies that have unprecedented and ever-growing power. So far none of her Democratic primary competitors has offered comment or rebuttal to her plan, but they’ll likely feel compelled to as the issues of 2020 take shape. As Facebook’s latest philosophical pivot makes clear, absent any input from political leaders or regulators, Silicon Valley will continue to govern itself. “These institutions are enormously powerful,” says Matt Stoller, a fellow at the Open Markets Institute think tank. “They’re either going to organize our society, or we’re going to figure out a way to fit them into our democracy.”