The Day – Antitrust legal guidelines unhealthy social-media match
A long overdue anti-trust initiative is gaining momentum. However, the focus is on large technology companies such as Facebook Inc. and Google parent Alphabet Inc., which present complex problems that cannot always be solved with classic antitrust approaches.
The cases are based on very standard material. The US Department of Justice accuses Google of illegally maintaining its dominant market share in search and search advertising by paying phone manufacturers and pressuring them to install Google as their default search engine. Meanwhile, the Federal Trade Commission and a coalition of states are suing Facebook for anticompetitive behavior for owning Instagram and WhatsApp.
An aggressive, much discussed solution is to break up companies to reduce their leverage. The government is pressuring Facebook to separate from Instagram and WhatsApp and could require Google to outsource its Android mobile operating system.
However, it is not clear that the content issues that people care about about tech companies would be improved by these types of actions. The best outcome could be for Big Tech to stay big, but to submit to a new framework of antitrust regulation that restricts the behavior of companies in all problem areas. The European Union is already working on a rules-based approach to address privacy and content moderation for the tech giants.
There are actually some theoretical economic reasons for breaking up large tech companies. Forced dropouts could be good news for startups, some research shows. You could also increase competition for advertising dollars and lower the prices of ads for other businesses.
However, it is unlikely that these are the main reasons authorities are trying to put Google and Facebook down. That’s because both search and social networks are likely to be natural monopolies, which means a business tends to crowd out rivals. If Google is forced to outsource Android, the search monopoly will likely not be broken. This was the experience of Europe when it won an antitrust case against the company. Facebook and Instagram could probably survive as separate social networks for a while, but at some point everyone would want to connect with everyone else on one platform.
A simpler explanation is that forced breakups are a raw power game. Some political leaders believe that companies like Facebook and Google have managed to put themselves above the rest of society, including the government. They are paranoid that Google is playing around with search results for political purposes and that Facebook is suppressing messages to help the opposition.
This seems to reflect a deeper fear – the fear that companies, not government, are now the front runner.
Governments don’t like it when someone else comes out on top. Basically, these are organizations that were formed specifically for the purpose of maintaining a monopoly of violence, and this DNA makes them very anxious if another unit gives the impression that it could make them overpowering.
Citizens are also concerned about this possibility – if Facebook and Google are above government, it also means they are above the collective will of the people. If social media companies are forced to split, the message may be sent that the government remains in charge.
But while it would certainly be cathartic, it’s questionable whether breakups would actually resolve many of the grievances people have about the largest technology companies. With an intact search monopoly, Google could continue to advertise its own products to competitors. Questions of privacy and data ownership rights remain. Both companies are still sometimes accused of censorship or partnering with nefarious foreign governments. And media companies would still complain that social media companies are taking too much of their revenue.
The problem is that antitrust laws were designed in a different age, before information technology and its powerful network effects were commonplace. Probably new antitrust policies should be developed that can be used to regulate tech platforms like utilities.
Noah Smith is a columnist for the Bloomberg Opinion. He was an assistant professor of finance at Stony Brook University.