For Apple, Amazon, Facebook, and Alphabet, covid-19 was an economic blessing. Even as the pandemic sent the global economy into a deep recession and cratered most companies’ profits, these companies—often referred to as the “Big Four” of technology—not only survived but thrived. Collectively, they now have annual revenue of well over a trillion dollars, and the value of their stocks has soared: together they’re worth $2.5 trillion more than they were 15 months ago.
Yet at the same time, they have come under unprecedented attack from politicians and government regulators in the US and Europe. While congressional hearings on charges that Facebook has been censoring conservatives or not doing enough to restrain disinformation and hate speech may have gotten most of the headlines and public attention, the companies are facing far more substantive threats, in the form of new lawsuits, proposed bills, and regulations.
This past fall, the Federal Trade Commission and 48 state attorneys general filed suit against Facebook, charging it with illegally maintaining a monopoly over the social-networking space “through a years-long course of anticompetitive conduct.” Soon after, the US Department of Justice and 11 state attorneys general filed suit against Google, charging it with illegally maintaining a monopoly over the search and search advertising markets. Apple is currently locked in a civil trial with game developer Epic Games, which is challenging Apple’s control of its App Store on antitrust grounds.
Last summer, the US House Judiciary Committee concluded a 19-month investigation into alleged anticompetitive activity by the tech titans. The resulting 450-page report described the companies as “the kinds of monopolies we last saw in the era of oil barons and railroad tycoons” and recommended that the government take action against them.
It’s easy, of course, to dismiss anything that comes out of Washington or Brussels as political posturing, but in this case that would be a mistake. President Joe Biden has named some of Big Tech’s sharpest and most vocal critics—including Columbia University professor Tim Wu, author of the book The Curse of Bigness, and Lina Khan, who served as special counsel to the Judiciary Committee during its investigation—to important roles in his administration. Europe is putting in place tougher regulations to try to limit Big Tech’s power. And antitrust action, at least with regard to the tech industry, has become that rarest of things: a bipartisan issue in Congress.
What’s arguably more important is that we’re in the middle of a radical shift in the intellectual discussion—one that has made it much easier to go after Big Tech. In many ways, we seem to be going back to the antitrust vision that determined US policy toward big companies for much of the 20th century, a vision that’s much more skeptical of the virtues of size and much more willing to be aggressive in keeping companies from exercising monopoly power.
America’s key antitrust laws were written around the turn of the 20th century. The Sherman Antitrust Act of 1890 and the Clayton Act of 1914 remain on the books today. They were written in broad, far-reaching (and ill-defined) language, targeting monopolists who engaged in what they called “restraint of trade.” And they were driven in large part by the desire to curb the giant trusts that had, via a series of mergers and acquisitions, come to dominate America’s industrial economy.
The quintessential example was Standard Oil, which had built an empire that gave it essentially complete control over the oil business in the US. But antitrust law wasn’t just used to block mergers. It was also used to stop a host of practices that were deemed anticompetitive, including some that nowadays seem routine, like aggressive discounting or tying the purchase of one good to the purchase of another.
This all changed with the Reagan administration in the 1980s. Instead of worrying about big companies’ impact on competitors or suppliers, regulators and courts started to focus almost entirely on what was called “consumer welfare.” If a merger, or a company’s practices, could be shown to lead to higher prices, then it made sense to step in. If it didn’t, antitrust regulators generally took a hands-off approach. That’s why Facebook’s acquisitions of Instagram and WhatsApp, Amazon’s acquisition of Zappos, and Google’s acquisitions of DoubleClick, YouTube, Waze, and ITA all sailed through the regulatory approval process without a hitch.
No longer, though. Over the past four or five years, scholars, politicians, and public advocates have begun to push a new idea of what antitrust policy should be, arguing that we need to move away from that narrow focus on consumer welfare—which in practice has usually meant a focus on prices—toward consideration of a much wider range of possible harms from companies’ exercise of market power: damage to suppliers, workers, competitors, customer choice, and even the political system as a whole. They’ve done so, not surprisingly, with the Big Four squarely in mind.
But what exactly would reining in Big Tech’s power look like? Short answer: It depends very much on which company you’re going after.
While antitrust advocates often rhetorically lump Apple, Amazon, Google, and Facebook together, creating a memorable image of four giant “gatekeepers” collectively controlling access to the digital economy, in reality the four companies have very different businesses that raise very different antitrust questions and will lend themselves to very different antitrust solutions.
Take, for a start, Apple. It is the most valuable company in the world, as of this writing worth more than $2 trillion. It’s also the most profitable company in the world. And yet, when it comes to discussions of antitrust and Big Tech, Apple often seems like an afterthought. In Wu’s book, Apple barely makes an appearance, and in Senator Amy Klobuchar’s new book, Antitrust, which is a ringing call for remaking and enforcing anti-monopolization policy, the discussions of Apple seem more cursory than central to her thesis.
That may be in large part because Apple has become a behemoth mostly on its own—while it has made plenty of acquisitions, its recent growth is mainly due to the simple fact that it has introduced three of the most successful and lucrative technology products in history, and that it has continued to convince customers to keep upgrading to the next generation of products. Even in this new world, it is not illegal to become hugely successful by building the proverbial better mousetrap.
To be sure, Apple has antitrust issues, which center on its requirement that all developers who are making apps for the iPhone and iPad sell their goods through the App Store, with Apple collecting a 30% fee. So it’s possible Apple will end up having to let developers sell directly to consumers, or even allow independent app stores. Even so, it could still collect a licensing fee from any app that wanted to be on the iPhone. And most users would, in all likelihood, continue to use the App Store regardless, if only out of habit and convenience.
So in the grand scheme of things, Apple wouldn’t seem to have that much to worry about from increasing antitrust pressures.
Amazon’s situation is more complicated. It, too, has the fact of organic growth going for it; while it has made its share of acquisitions, it has grown mostly on its own, driven by its relentless appetite for selling more, its huge investment in infrastructure, and its willingness to spend huge amounts of money in order to win and keep customers. Its biggest antitrust problem stems, paradoxically, from something it created itself: Amazon Marketplace.
Marketplace was the result of a decision that, at the time, seemed crazy to many: allowing outside sellers to compete with Amazon products and sell on its platform, with Amazon taking a cut of the proceeds. It turned out to be a genius move: Marketplace now accounts for a huge chunk of Amazon’s sales and an even bigger chunk of its retail profits. But Marketplace has also become the place where Amazon’s exercise of power is most visible and most obviously problematic.
As Brad Stone details in his new book Amazon Unbound, many Marketplace sellers accuse the company of juking search results to reward those who use its fulfillment services rather than filling orders on their own; rewarding sellers who advertise on the site; boosting Amazon’s own house-brand products in the rankings; and, most famously, using Marketplace data to identify particularly successful products and then mimicking them to undercut Marketplace sellers. Whether Amazon is a retail monopolist is an open question—its total sales remain well below Walmart’s, and even in online commerce its market share is below 50%. But it does unquestionably control Marketplace, and the sellers who use it don’t have many other places to go. That’s why politicians like Senator Elizabeth Warren have argued that Amazon should be required to spin off Marketplace, while others have suggested that tough regulations be imposed on how it manages the site.
Even so, it’s not surprising that when the government was deciding which companies to file antitrust lawsuits against, it went after Google and Facebook first. Those companies are the easiest to fit into a traditional definition of a monopoly—more than 90% of all internet searches are performed through Google, and it and Facebook together control around 80% of the digital ad market. Google’s acquisitions of DoubleClick and ITA played key roles in fueling its evolution. It faces a lawsuit in Europe for tinkering with search results to put its own shopping-comparison engine higher up in the rankings and the sites for rival services lower down.
Perhaps most important, Google effectively holds the economic fate of websites across the world in its hands—a change to its search engine or to YouTube’s algorithms can cost people thousands of customers or viewers. None of this might have mattered much in the days when regulators worried mainly about a monopoly’s impact on consumer prices, since just about everything Google does is free to consumers. But under the new antitrust model, the company’s sheer reach makes it a good target.
Not, though, as good a target as Facebook. If you had to bet, in fact, on which company is most likely to suffer real consequences from the revolution in antitrust policy, you would be smart to bet on Facebook. It gets 61% of all social media visits in the US. It’s been famously ruthless in snuffing out competitors, either by duplicating their features—as it did with Snapchat and Twitter—or by simply acquiring them. Its acquisitions of WhatsApp and Instagram look like precisely the kind of anticompetitive acquisitions that regulations were designed to stop. And its lack of transparency about the way it uses customer data has made it notorious.
But what would a breakup really look like?
The Big Four are unquestionably in the government’s crosshairs. Yet their stocks are more valuable than ever, which suggests that investors, at least, are betting that the antitrust hullaballoo won’t add up to much. Why?
One reason is that in going after Big Tech, trustbusters are going after some of the most popular companies in America. Surveys routinely find that Amazon is the most trusted company in the US, with Google and Apple not far behind in the “most admired” rankings. Facebook is the exception; but even if people don’t like it, they find it useful.
Antitrust advocates want to take other kinds of harms into account, but they’re not saying that consumer interests should be ignored. And the benefits people get from these companies are easy to show, while the harms they’re inflicting on users can be hard, if not impossible, to define, often resting on somewhat abstract ideas of restricted consumer choice and the costs of lost future innovation.
These costs are arguably real, but it’s not obvious they’re enough to build popular support for remedies like breaking the companies up. And while in theory we’re talking about the law, in practice all decisions about what cases to bring and whom to bring them against—and which regulations and remedies politicians and regulators push for—are shaped by politics, which means in turn that they’re shaped by popular opinion. It’s unlikely any president is going to want to be seen as the person who broke up Google, particularly if it means worse search engines and maps.
What this suggests is that even if public rhetoric suggests a campaign to cut Big Tech down to size, we’ll likely end up instead with a series of company-specific remedies. Amazon may have to comply with stricter regulations on Marketplace, including curbs to its power to manipulate its search results or perhaps even its ability to compete with Marketplace sellers. Apple’s monopoly on the App Store may end. Google may face stricter regulations on what it can do with data, and how its search engine’s ranking works.
These would not be trivial changes, which is why the companies can be expected to fight them. And yet in most cases, it’s hard to see that they would be transformative. In fact, in recent years these companies have already had to change various questionable practices in response to court cases or inquiries from regulators. It hasn’t kept them from missing a beat.
Facebook, which is the least popular of the Big Four, might be different. It may be at risk of the kind of breakup that happened to Standard Oil and AT&T, with Instagram and WhatsApp spun out as independent companies. That would be logistically difficult, since Facebook has worked assiduously to integrate the three services. But it’s not impossible. And it’s a logical, easy-to--understand remedy that might inject some competition into social media. Even so, it’s not clear this would fundamentally dent Facebook’s hold on users, given the treasure trove of data it controls and the power of network effects.
Indeed, if the new antitrust movement really wants to change the digital economy, challenging the Big Four’s various sketchy practices is not going to be enough. These companies’ greatest competitive advantage isn’t the legally dubious stuff they’re doing—it’s their perfectly legal access to enormous amounts of detailed and granular user data. That data helps them understand their users better than anyone else and make continuous improvements to their products and services—which in turn helps them keep their current users and add new ones, which gives them access to more data, and so on. It is the key to their growth.
Truly challenging the power of the Big Four would mean rethinking how data is gathered and used by companies, and who gets access to it. It might mean requiring that data be shared, that algorithms be transparent, and that consumers have far more control over what they share and what they don’t.
For that to happen, the new trustbusters will have to make the case that even if we like what our digital overlords are doing with our data, it’s still wrong for a small number of companies to control so much of it. In a way, they need to make the case that, as in the past, at some point bigness in and of itself is a curse. Big Tech has made that a hard sell in America, simply because the companies have created so much value for consumers. We’re going to find out if that’s enough to keep them safe in this new world.
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