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DANIEL VAUGHAN: The case for breaking up Big Tech
The idea of using antitrust laws to break up Big Tech companies like Facebook and Google (and its parent company, Alphabet) is no longer a theory. Several states are actively pursuing serious antitrust litigation.
The Wall Street Journal reports that Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee, and the District of Columbia have all joined in exploring antitrust action. This litigation provides a chance to break not just Big Tech’s impact on the economy, but also its growing monopolistic effects on culture.
Generally speaking, the expectation is that the market will eventually topple monopolistic giants (see the rise and fall of great companies like Sears or Radio Shack for examples). The term most economists use is the one coined by Joseph Schumpeter, “creative destruction,” which is when the markets cause new companies to overtake the old ones with innovations and advances. And in a free market, that is how things are supposed to work.
Schumpeter’s other belief was that monopolies only occurred when the government steps in with regulations that prevent new competitors from entering the fray.
The capacity for regulations to give a business a significant monopolistic edge is not lost on these massive companies. Facebook, Google, and other Big Tech companies shifted their tune from castigating regulation to embracing it — once they saw the advantages regulation would give them.
Politicians and thinkers on the left and right are running to embrace regulating Big Tech because they hear their constituents say something must be done about these companies. But if they want regulation, why give them what they want?
Schumpeter and his cohort may have been right that monopolies are only granted by state intervention, but what he missed is that monopolies may need to be stopped when these companies start pushing for regulation.
Think of antitrust laws as a pre-emptive measure against the regulations that allow a monopoly to take shape. The market may be able to topple companies like Facebook and Google eventually, but in a bid to prevent them from lobbying for regulation, antitrust laws break them up before they can obtain that level of power.
In the case of Facebook, in particular, the social media giant has amassed power not through innovation, but through predatory acquisitions — buying competitors or outright stealing from them — to create a massive platform. In a piece for Commentary magazine, Christine Rosen noted:
If you include all of Facebook’s platforms (such as WhatsApp, Instagram, and Messenger), more than 2 billion people use its services every day. According to a Pew Research survey from 2017, 67 percent of American adults get their news from social media. Excluding China, Facebook controls four out of the top five social-media platforms on earth.
Indeed, Instagram started becoming a competitor until Facebook bought it. WhatsApp became a massively popular messaging platform that moved people off Facebook — until Facebook bought it. Facebook even tried buying out its latest competitor, Snapchat — and since that has failed, it’s mercilessly stolen ideas from the platform.
And now, after Facebook has soaked up all those companies, gaining a monopolistic edge, Mark Zuckerberg wants government regulation.
How about: “No!”
Don’t give Facebook and Zuckerberg what they want — give them what they don’t want: antitrust litigation that busts them up, punishes their predatory practices, opens the social media market up to competition, and reduces Mark Zuckerberg’s influence.
Competition is a good thing. You can see this in things like ride-sharing apps or food delivery services or other new industries like scooter rentals. Uber has to compete with Lyft and other services. In food delivery, Uber, DoorDash, Postmates, Grubhub, and others are all vying for market share and providing choice and variety to customers. The more competition that opens up, the better it is for consumers.
Indeed, Netflix once had significant control over most of the TV and movie streaming business in America; now, people don’t know if the company will survive because nearly every primary content provider in the country is gunning for market share. The result is that we’ve gotten hit by a deluge of TV and movie content to satisfy nearly any genre request you could have — all while traditional cable and satellite continue plugging along. Customers are benefitting from Netflix’s struggles.
Facebook doesn’t face the same pressure; they bought all their competitors, stole from them, or drove them out of business. Antitrust litigation forces Facebook back to into the fray and creates more space in the social media sphere. Google deserves the same, and their parent company, Alphabet, seems designed to get busted by antitrust regulators.
The point isn’t that antitrust litigation should be in opposition to big business — the point is to prevent these companies from expanding the reach and range of government power so that it only benefits the already super-wealthy corporations.
It’s a way to protect the integrity of the free market to allow that competition to thrive, and to force Facebook to face their customers: If they can’t provide a good product, people should have the opportunity to leave, not stay forced in the Facebook ecosystem.
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